Trump threatens to impose a 30% tariff on Europe and Mexico, U.S. stock market fluctuations are limited, and the market is focused on the release of corporate earnings reports.

Despite U.S. President Trump once again dropping a tariff bomb over the weekend, claiming to impose a 30% tariff on EU and Mexican goods starting August 1, the market reacted relatively calmly. Investors are betting that there is still room for negotiation on the measure and are shifting their focus to the upcoming earnings season this week. The three major U.S. stock indices showed a lackluster performance on Monday, reflecting a strong wait-and-see atmosphere among investors.

( Trump announced a 30% tariff on the EU and Mexico: effective August 1 )

U.S. stocks fluctuated slightly, with earnings season becoming the focus of attention.

U.S. stocks edged lower on Monday, with the Dow Jones Industrial Average falling 53 points or 0.1%; the S&P 500 index also dipped 0.1%; while the Nasdaq Composite index hovered around the flat line. Despite the renewed controversy over Trump's trade policies, the market generally believes that this move is intended to apply pressure on negotiations, leaving room for maneuver.

Investors' main focus this week is on the release of second-quarter earnings reports, with major banks like JPMorgan Chase set to announce their results starting Tuesday.

GDS Wealth Management Chief Investment Officer Glen Smith stated: "What the market is really concerned about is whether corporate earnings reports can be strong enough to overshadow the shadows of trade issues. So far, the market's tolerance for tariff news has been quite good, and the focus remains on the economic fundamentals."

Trump threatens new tariffs, EU and Mexico seek a way out of negotiations.

Trump announced last Saturday that a 30% tariff would be imposed on imported goods from the European Union and Mexico, effective August 1. This move shocked European officials and the market, however, both the EU and Mexico have stated that they will continue negotiations with the U.S. before the end of July, hoping to reduce the tariff rate.

Trump's announcement comes as the United States is about to release the latest inflation data, which will help the market assess the actual impact of the current tariffs on the U.S. economy.

The EU may make concessions and does not rule out countermeasures.

In the face of pressure from the United States, EU economists have pointed out several possible strategies, including increasing procurement from the US (such as soybeans and military equipment), lowering tariffs on existing US imports (such as cars), and even restricting the export of certain strategic products (such as European pharmaceuticals).

ING economists Brzeski and Fechner warn that the most radical response could be a "digital tariff" or the implementation of stricter regulations on American tech giants, which could trigger a full-blown trade war.

However, most analysts remain optimistic that Europe and the United States will reach a compromise before the deadline.

Possible compromise solution: 15% tariff?

Commerzbank Chief Economist Joerg Kraemer stated in an interview that he expects that the US and Europe will ultimately reach some degree of compromise, with an average tax rate likely landing around 15%, higher than the market's original expectation of 10%, but still well below the 30% proposed by Trump.

Berenberg economist Salomon Fiedler holds a more optimistic view, believing that tariffs may ultimately remain at 10%. He pointed out that Trump often takes extreme positions initially and then adjusts his stance later to achieve negotiation goals.

Domestic political and economic pressure, could Trump back down?

Fiedler also mentioned that Trump has not immediately implemented tariffs, but has set a deadline of August 1, indicating that there is still room for negotiation. In addition, companies may pass on the costs of tariffs to consumers, which also puts potential public opinion pressure on the White House.

On the political level, the relationship between the White House and the Federal Reserve (Fed) is tense. White House Chief Economic Advisor Hassett stated on Sunday that if there is just cause, Trump could consider replacing Fed Chairman Jerome Powell. This further highlights Trump's strong concern over interest rate policies and economic control.

EU's stance: Still seeking solutions but prepared to retaliate.

EU Trade Commissioner Sefcovic expressed regret and disappointment over Trump's letter, but the EU remains committed to resolving disputes through negotiations. He emphasized, "We cannot abandon negotiations without making a real effort." However, the EU has also postponed the countermeasures originally scheduled to start this week and is preparing to respond further. With August approaching, the EU needs to accelerate its pace to avoid escalation.

The European economy is under pressure, experts call for a rapid response.

Analysts warn that the threat of a 30% tariff undoubtedly brings new pressure to Europe. Alicia Garcia-Herrero, a senior researcher at the Bruegel think tank, stated bluntly: "This is bad news for Europe, as Trump is trying to force the EU to come up with a more sincere proposal."

Two economists from ING also stated: "This letter is neither a love letter nor a threatening letter, but rather a bargaining chip used by Trump to apply pressure at the negotiating table."

This article reports that Trump threatens to impose a 30% tariff on Europe and Mexico, with limited fluctuations in the US stock market, as the market focuses on the release of corporate earnings. First appeared on Blockchain News ABMedia.