Tariff Update: No Pause, Higher Rates on Japan Considered

Stock markets mistakenly assumed that the U.S. would end its tariff threats. Instead, President Trump said on Tuesday that he would not extend the July 9 deadline he imposed.Markets quickly reacted, as Nasdaq (QQQ) ended down by 0.82% on the day. The Dow Jones (DJI) rose, while the Russell 2000 (IWM) added 1.03%.Financial Times floated the idea of mini-trade deals closing before the July 9 deadline. Instead of bigger trade deals that would remove uncertainties, countries might agree on smaller deals. To raise the stakes, Trump expressed doubt that the U.S. would reach a deal with Japan. The President is now considering higher tariff rates in the 30% to 35% range. This is above the 24% proposed on Liberation Day.The Nikkei gained around 0.9% YTD. However, after the U.S. dollar lost 10%, the Japanese stock market is performing relatively well. Markets are cautious about their prospects. Toyota Motor (TM) lost around 12% in 2025, while Honda Motor (HMC) is up by 2.28%. Conversely, Sony Group (SONY) is up by 20% this year. Drug firm Takeda Pharmaceuticals (TAK) is up by 16%.Your TakeawayInvestors will watch for a trade agreement with the European Union next. The EU would likely accept a 10% universal tariff. Still, it would want exemptions for alcohol, pharmaceuticals, chip stocks, and commercial aircraft.