Donald Trump has revealed that additional trade agreements are on the horizon, especially one involving the UK, which he referred to as “historic.” He also urged people to invest in the stock market, claiming, “You’re better off going out and buying stocks. This country is poised to surge like a rocket ship.”
The stock market seems to agree, jumping over 500 points following news that it might sidestep inflation and economic slowdown linked to tariffs.
However, what about the complex trading relationships with China and the stock markets in the EU? Perhaps it’s worth considering these possibilities:
More trade deals between India and Japan might be announced soon. From what I hear, if the U.S. government hadn’t been preoccupied with possible conflicts with Pakistan, India would have been prioritized. Australia and South Korea could soon follow suit.
On a more positive note, there’s a chance Trump has learned from the market’s near-collapse after what he called “Liberation Day.” It seems he has moved away from the aggressive Sledgehammer strategy, opting instead for Treasury Secretary Scott Bescent or tools from Peter Navarro to negotiate deals.
Yet, I have my doubts. These agreements may be somewhat trivial. The UK economy is valued at less than $4 trillion.
To put things in perspective, the U.S. boasts a GDP of over $30 trillion, while China stands at around $20 trillion, and the EU totals about the same.
Let’s face it, we still have no substantial trading leverage with partners whose economies are dwarfed by that of the U.S.
Another point of concern is the nature of the UK agreement. My sources suggest that Team Trump rushed to secure a deal when it became clear that negotiations with India were dragging on. Details in this framework seem somewhat vague.
The U.S. currently maintains a trade surplus with the UK, which is a key ally, but it still imposes a standard 10% tariff. The deal seeks to cut tariffs on UK cars from 25% to 10%, but one must wonder how many everyday workers drive luxury vehicles like Rolls-Royces or Jaguars.
Moreover, the UK is geographically distant from the U.S. Unlike China, which can provide affordable products to consumers, the UK does not hold the same weight in Trump’s trade strategy. Getting it right with China could lead to significant benefits for the U.S. economy.
If negotiations go awry, though, we might face inflation or even a recession.
Bescent is set to travel to Geneva to engage with Chinese economic leaders, aiming to navigate what many believe will be difficult trade talks. Trump surely understands the stakes involved.
Currently, the administration is working to exempt baby products, like car seats and strollers, that contain components made in China, as the last thing Trump wants is to aggravate inflation for working families.
Trump has already indicated that the original 145% tariffs on China’s goods have been significantly lowered. Reports now suggest these could decrease to 50% in exchange for a favorable deal.
To be transparent, I’m not particularly optimistic about betting on Donald Trump, given past lessons. Many assumed his political career was effectively over after January 6th, but Lawfare hasn’t slowed him down. Not even a close call could keep him from returning.
Still, the UK agreement announced on Thursday marks just the start of a larger effort. The real tests lie ahead.
