What's Changing in Trump's New Tariffs?

Zhi Tong Financial APP has learned that Zhongshan Securities released a research report stating that, on July 31 local time, Trump signed an executive order modifying tariffs to make them more uniform and effective. The new tariffs will take effect on August 7. After the new tariffs take effect, it is estimated that the US actual tariff rate will increase from around 11% to around 16%, which is closer to what Trump threatened earlier.

From an asset perspective, short-term US stocks may experience fluctuations, but medium-term outlook remains positive. Firstly, there is little room for further improvement in the tariff situation. The US has already negotiated with China, the EU, Japan, and other major trading partners, and partial consensus has been reached on tariffs. This means that the tariff situation will not improve further, leading to amplified stock fluctuations; secondly, the US Congress will be on recess in August, which usually leads to higher volatility in stocks and the dollar; thirdly, the market may start preparing for a no-rate-cut scenario by the Fed in September, with a current probability of 45.2%, making it less likely that interest rates will remain positive.

Zhongshan Securities believes that after fluctuations, US stocks will continue to rise, with a medium-term trend remaining upward until the midterm elections next year.

Zhongshan Securities' main views are as follows:

Event

On July 31 local time, Trump signed an executive order modifying tariffs to make them more uniform and effective. The new tariffs will take effect on August 7.

Core Content

The main content of Trump's new tariffs is as follows: 1) a new tariff rate ranging from 10% to 41% applies to 70 countries and regions, with the exception of unmentioned countries that continue to pay a 10% base tariff; 2) the new tariffs will take effect on August 7, but goods already in transit before August 7 or entering the US before then will be exempt from additional tariffs; 3) any attempt to avoid these tariffs by transshipping through a third country will be subject to a 40% punitive tariff rate.

This round of tariffs has several key takeaways:

1) The current tariff income has basically reached the level agreed upon by Trump's government. After the new tariffs take effect, it is estimated that the US actual tariff rate will increase from around 11% to around 16%, which is closer to what Trump threatened earlier.

2) Countries that have committed to increasing their investment in the US and reducing their trade barriers will receive lower tariff rates. The main countries have achieved tariff rates that are significantly lower than those announced on April 2 or July 7-12, with the exception of Brazil, Canada, and Turkey, which have chosen a "hardline" approach.

3) Tariffs can be both a goal and a means to achieve it. The manufacturing industry's return is still an important mid-term demand. This round of tariffs remains independent of industry tariffs, with most industries being stable employment or supply chain security-oriented industries such as steel, aluminum, automobiles, semiconductors, pharmaceuticals, and key minerals.

Attention points for future tariffs:

1) The tariff war is still a continuous process. The progress in tariff negotiations has reduced the pressure on the US, allowing it to apply more pressure to countries that have not reached agreements, making the US reluctant to truly end the tariff war; 2) There may be short-term exemptions or reductions for Mexico and Canada, but this will require other concessions. Since June, China and the US have accelerated their cooperation on fen-tani issues, but the US seems to want more concessions, excluding short-term exemptions or reductions; 3) The 232 industry tariffs can focus on semiconductors, pharmaceuticals, and key minerals.

Risks:

US tariff policy may exceed expectations.