Global markets opened the week with an air of cautious detachment, showing minimal response to US President Donald Trump’s latest tariff escalation threats. Investors largely brushed aside the president’s Friday night tweet pledging to double tariffs on steel and aluminium imports to 50%, despite initial expectations of notable market turbulence. Instead of the Canadian dollar weakening—given Canada’s significant steel exports to the US—the loonie firmed modestly in early trading against a generally softer US dollar, illustrating how global investors may be experiencing tariff fatigue after years of policy unpredictability.
Highlights:
Markets show little reaction to Trump’s tariff escalation threat
Canadian dollar strengthens despite trade exposure
Global equity futures dip modestly but remain largely stable
Investors show signs of skepticism toward follow-through on trade threats
“TACO” Meme Mindset: Markets Anticipate a Walk-Back from Trump
The apparent dismissal of the tariff threat by financial markets may be rooted in what has come to be known as the “TACO” investor mindset—Trump Always Chickens Out. Market participants appear to be pricing in a high likelihood that the new tariffs, announced with an effective date of Wednesday, may either be postponed or watered down before implementation. This form of late-stage brinkmanship has become characteristic of Trump’s policy style, reminiscent of reality television plot twists. However, this strategy has worn thin among investors, particularly as past trade threats have often ended in partial concessions or indefinite delays.
Highlights:
“TACO” investor mindset reflects skepticism toward actual implementation
Previous tariff threats have often been softened or reversed
Reality TV-style brinkmanship no longer surprises global markets
Wednesday deadline looms with little conviction of follow-through
EU Pushes Back as Court Ruling Strengthens Its Position
European Union negotiators expressed clear displeasure at the latest US tariff move, threatening retaliatory measures in response. However, their leverage has increased following a recent court ruling against the April 2 round of tariffs, which the EU has interpreted as judicial support for its position in the dispute. The EU’s measured yet firm response suggests a broader strategic recalibration, leveraging legal victories while signaling willingness to counter-escalate if necessary.
Highlights:
EU warns of retaliation against new US steel and aluminium tariffs
Recent court ruling against April tariffs boosts EU leverage
Brussels adopting a legal-meets-diplomatic stance in trade negotiations
Heightened risk of tit-for-tat if US proceeds with higher tariffs
China Unmoved by Trump’s Rhetoric as Diplomatic Chill Deepens
Trump’s sharp rhetoric against China over the weekend appears to have fallen flat. Beijing has made no overtures indicating willingness to renegotiate, nor has President Xi Jinping responded to Trump’s criticism. China continues to assert its position on trade self-reliance and industrial policy, making it unlikely that a high-level diplomatic resolution will emerge in the near term. The standoff suggests a further decoupling in trade relations, reinforcing concerns about long-term geopolitical fragmentation in global supply chains.
Highlights:
China offers no response to Trump’s recent trade accusations
Diplomatic deadlock continues, with no outreach from President Xi
Beijing remains firm on trade and policy independence
Supply chain realignment fears persist amid prolonged tensions
US Treasury Criticized for Trade Hypocrisy in Product Access Debate
Irony colored recent commentary from US Treasury Secretary Scott Bessent, who accused China of restricting the export of critical goods to the US. Observers noted the contradiction in Washington’s complaints, given that the US initiated the trade war with the express goal of curbing reliance on Chinese imports. These remarks have only heightened the sense of incoherence in US trade policy, raising questions about the long-term effectiveness of punitive tariffs in reshaping global trade flows.
Highlights:
Treasury Secretary accuses China of holding back essential products
Critics point to inconsistency in US trade policy objectives
Trade war initiated by the US now criticized for its consequences
Increased scrutiny over effectiveness of tariff-driven strategy
Fed’s Waller Flags Tariff-Induced Risks But Stays Hopeful on Rate Cuts
Federal Reserve Governor Christopher Waller, speaking in South Korea, acknowledged that tariffs pose downside risks to economic activity and employment, while potentially contributing to upward pressure on inflation. Nevertheless, he maintained an optimistic tone, reiterating hopes for “good news” in the form of rate cuts later in the year. Waller’s dovish remarks continue to frame the Fed as data-dependent and willing to ease policy should trade-related and macroeconomic uncertainties persist.
Highlights:
Fed’s Waller warns tariffs could harm growth, raise inflation
Despite risks, Waller remains hopeful for rate cuts in 2025
Dovish Fed outlook persists amid policy ambiguity
Monetary policy seen as possible cushion against trade volatility
Market Economic and Policy Events on the Radar
Investors are monitoring several critical indicators and central bank appearances that may influence sentiment in the days ahead. On the economic front, the UK house price index, European Purchasing Managers’ Index (PMI), and the US ISM manufacturing survey are all expected Monday. Additionally, Fed Chair Jerome Powell is scheduled to make opening remarks at the Federal Reserve Board’s International Finance Division 75th Anniversary Conference, though his comments will be limited in scope. More substantive engagements are expected from other Fed officials including Chicago Fed President Austan Goolsbee and Dallas Fed President Lorie Logan, who are slated for Q&A sessions later in the day.
Highlights:
Key macro data: UK house prices, Eurozone PMIs, US ISM factory survey
Fed Chair Powell to speak at Fed event; limited remarks expected
Fed officials Goolsbee and Logan to participate in policy discussions
Market focus on economic signals and potential Fed rate path insights
Markets Shrug Off Trump Tariff Threats as Focus Shifts to Fed and PMIs
Global markets showed muted reaction to former U.S. President Donald Trump’s surprise announcement to double tariffs on steel and aluminum, with the Canadian dollar firming slightly and European shares opening only modestly lower. Investors appear skeptical of Trump’s follow-through, recalling past instances of last-minute reversals, as the so-called “TACO” meme (“Trump Always Chickens Out”) seems to shape sentiment.
Despite rhetorical escalation and EU threats of retaliation, markets remain steady, reflecting tariff fatigue and a stronger focus on macroeconomic data and monetary policy cues. Fed Governor Christopher Waller acknowledged tariff risks but reiterated the potential for rate cuts later in the year, reinforcing dovish expectations. Attention now turns to PMI data and Jerome Powell’s remarks for further guidance on economic momentum.
Impact on Stock Market and Investors:
Tariff Fatigue Sets In: Markets are discounting Trump’s tariff threats as political noise, with minimal impact on equity risk premiums.
Focus on Fed Policy: Continued dovish tone from Fed officials is anchoring rate-cut hopes, supporting equity valuations.
Sector Implications: Industrial and metals sectors could face short-term volatility if tariffs materialize, but broader indices remain insulated.
Sentiment Stable: Limited investor reaction suggests market confidence in status quo trade dynamics despite political theatrics.
Impact on Indian Stock Market:
Global Calm Supports Indian Equities: Stable global cues and resilient risk appetite may support FII inflows into Indian markets.
Metal Stocks May React: Any escalation in tariffs globally could weigh on Indian metal exporters and commodity-linked firms.
Rupee Steady: With the dollar weakening slightly and no major risk-off move, the INR remains stable, aiding foreign investment.
Macro Focus Dominates: Indian traders may prioritize domestic PMI, RBI policy outlook, and inflation trends over US tariff noise.
Focus Points for Investors:
Watch Fed Commentary: Jerome Powell and other Fed speakers could influence global risk appetite and rate expectations.
Ignore Tariff Rhetoric, Watch Action: Markets are pricing political talk lightly—look for actual policy implementation before reacting.
Monitor PMI and ISM Surveys: These indicators will shape growth expectations and risk sentiment in the near term.
Stay Selective in Metals & Exporters: Be cautious on sectors sensitive to trade tensions until clarity emerges.
