Tariff turmoil: Trump’s trade offensive shakes global markets

Ifra Dilshad Khan | July 14, 2025

President Trump has announced sweeping new tariffs of up to 50% on imports from 23 countries, including the EU, Mexico, and Canada, citing trade imbalances and political grievances. The EU and Mexico have criticized the move as unfair, with the EU threatening countermeasures.

Markets showed muted reactions, with the euro dipping and oil prices rising slightly amid looming U.S. sanctions on Russia. Financial analysts view the tariffs as a pressure tactic, while fears persist over inflation and supply chain disruptions.

U.S. President Donald Trump has escalated trade tensions by announcing a 30% tariff on imports from two of the country’s largest trading partners—the European Union and Mexico—effective August 1. The decision follows the breakdown of negotiations and is part of a broader campaign targeting 23 countries with duties ranging from 20% to 50%. These new levies will be layered on top of existing tariffs, including 50% on steel and aluminum and 25% on autos, which remain in force. A 50% duty on copper was also unveiled.

Trump made the tariff declarations through letters posted on his Truth Social platform, citing Mexico’s role in undocumented migration and illicit drugs, and a long-standing trade imbalance with the EU.

The White House has given countries until August 1 to secure bilateral trade deals in order to avoid the hikes. Among the nations targeted are key U.S. allies, including Canada, Japan, Brazil, and South Korea. Canada received a separate notice imposing 35% duties, while Trump threatened Brazil with a 50% tariff in retaliation for what he called the “witch-hunt” trial of former President Jair Bolsonaro.

Pushback from trading partners

The move has drawn sharp responses from both Brussels and Mexico City. European Commission President Ursula von der Leyen said the EU would take “proportionate countermeasures if required” while continuing to work toward a deal before the August deadline. French President Emmanuel Macron called on the bloc to prepare credible retaliation using all available instruments, including the Anti-Coercion Instrument. Germany, meanwhile, has urged a swift resolution to protect its export-dependent industries.

In Mexico, officials voiced disapproval during high-level talks with the U.S. State Department, calling the decision “unfair treatment.” President Claudia Sheinbaum maintained a calm posture, expressing hope that better terms could be achieved. “You need a cool head to face any problem,” she said, noting that 80% of Mexico’s exports are U.S.-bound, making the country particularly vulnerable.

Currency and commodity reactions

Financial markets reacted cautiously to Trump’s announcement. The euro slipped to a three-week low in early trading on Monday before recovering slightly, last seen 0.13% lower at US$ 1.1676. The dollar gained 0.28% against the Mexican peso, rising to 18.6763. Analysts attributed the muted response to investor desensitization after repeated tariff threats.

“It seems like financial markets have become insensitive to President Trump’s tariff threats now, after so many of them in the past few months,” said Carol Kong, a strategist at Commonwealth Bank of Australia. Traders viewed the move as a negotiating tactic rather than an immediate economic disruption.

Gold, however, surged as the threat of escalating trade frictions revived safe-haven demand. Prices soared as investors sought refuge from market uncertainty, with the rally further fueled by geopolitical tensions and concerns over inflation. Traders are closely watching upcoming U.S. inflation data and China’s GDP release for further cues.

Oil prices rise, but gains capped

Oil prices edged higher on Monday, extending Friday’s 2% rally, as markets assessed the impact of potential new U.S. sanctions on Russia that could tighten global supply. Brent crude rose 15 cents to US$ 70.51 per barrel, while West Texas Intermediate climbed 14 cents to US$ 68.59.

Trump said he would send Patriot air defense missiles to Ukraine and is expected to make a major announcement on Russia soon. A bipartisan U.S. sanctions bill gained momentum last week, though it still awaits Trump’s backing. In parallel, EU envoys are working on an 18th sanctions package against Russia, which may include a lower price cap on Russian oil.

Still, oil gains were tempered by signs of rising supply. The International Energy Agency (IEA) reported that Saudi Arabia exceeded its June output target under the OPEC+ agreement, producing 9.8 million barrels per day—430,000 bpd above quota. The Saudi energy ministry insisted it remained compliant, citing marketed crude volumes in line with the target.

Adding to the pressure, China’s June oil imports surged 7.4% year-on-year to 12.14 million bpd, the highest daily rate since August 2023. Analysts at J.P. Morgan warned that high inventories nearing 2020 levels may begin surfacing in Western markets, weighing down prices further.

Broader market implications

Trump’s tariff actions have contributed to soaring U.S. customs revenues, which crossed US$ 100 billion for the fiscal year ending June, according to Treasury data. However, critics warn that the costs could shift to American consumers, exacerbating inflation and economic uncertainty.

Meanwhile, Trump has renewed pressure on the Federal Reserve, suggesting Chair Jerome Powell should step down and urging rate cuts—a move likely to stir further debate over central bank independence. Markets are awaiting U.S. inflation data on Tuesday for clues on future Fed policy, with current forecasts pricing in around 50 basis points of rate cuts by December.

As the August deadline looms, global markets remain on edge, bracing for a possible escalation in trade frictions that could reverberate across supply chains, commodity flows, and geopolitical alignments.