Stocks surged from Trump’s EU tariff panic low; Gold wobbled

·       As highly expected, Trump scaled back his 50% EU tariffs narrative within 48 hours; Gold, USD, and UST wobbled

·       But Wall Street may remain under stress on Trump’s constant policy flip-flops, although he is using tariff threats as trade deal negotiation tactics

·       The market is now being controlled by Trump’s morning moods, Truths, and 24/7 media bytes, not macros and Feds

·       Trump’s bellicose policies may isolate the US, while China may forge better ties with the EU, India, and the rest of the world in the biggest geopolitical shift of the century

On Thursday, May 22, 2025, Wall Street closed almost flat on hopes & hypes of fiscal prudence by Trump admin in the coming days. Wall Street Futures were boosted by Trump’s disinvestment plan of PSUs like Freddie, while undercut by the narrow passage of Trump’s tax cut bill by only one vote in the House. Later, Trump’s comments on pharma tariffs of up to 90% affected the US stock futures.

The S&P 500 and the Dow finished marginally lower, while the Nasdaq added 0.3%. Wall Street remained cautious, with the bill — featuring tax cuts and increased defense spending — now headed to the Senate and potentially adding trillions to the $36 trillion national debt. The Congressional Budget Office (CBO) pegs the cost at nearly $4 trillion, stoking fears of fiscal instability. Bond markets reflected that anxiety, as the 30-year Treasury yield briefly touched 5.14%, its highest since 2023; gold surged.

Trump’s EU Tariffs flip-flops

 On May 23, Trump announced a proposed 50% tariff on all EU goods starting June 1, 2025, citing stalled trade negotiations and claiming the EU was formed to "take advantage of the United States on trade." He described the EU as "very difficult to deal with" and "nastier than China" in trade talks. On May 25, following a call with European Commission President Ursula von der Leyen, Trump agreed to extend the EU tariff deadline from June 1 to July 9, 2025, to allow for further negotiations. He described the call as "very nice" and noted von der Leyen’s request to "rapidly get together" for talks. Trump confirmed this in a post on his @realDonaldTrump account, stating it was his "privilege" to grant the extension. Some reports suggest the tariff threat may partly stem from European (EU_ reluctance to align with U.S. policies on China, though this is speculative and unconfirmed.

Trump’s 50% Tariff Threat on EU Goods:

On early Friday, May 23, 2025, President Trump announced a proposed 50% tariff on all EU imports, effective June 1, 2025, citing stalled trade negotiations and accusing the EU of being “very difficult to deal with.” He stated on Truth Social that the EU was formed to “take advantage of the United States on TRADE” and that discussions were “going nowhere.” Treasury Secretary Scott Bessent supported this rhetoric, suggesting that the tariffs were intended to “light a fire under the EU” to accelerate trade talks.

Trump posted on his Truth handle:

“The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with. Their powerful Trade Barriers, VAT Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against American companies, and more have led to a Trade Deficit with the U.S. of more than $250,000,000 a year, an unacceptable number. Our discussions with them are going nowhere! Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025. There is no Tariff if the product is built or manufactured in the United States. Thank you for your attention to this matter!”

Trump often termed the EU a ‘mini-China’, but more harmful than China. China, the EU, and virtually all other big US trading partners, having large trade deficits with the US, are virtually ripping off the US for decades after decades. This includes both US allies and adversaries. Trump 2.0 has emphasized reducing the US trade deficit through tariffs, targeting the EU due to its $235.6 billion goods deficit in 2024.

Trump's admin often pointed out that EU export to the US is a proxy of China as most of it originated from China. The EU has around $220B surplus in Goods export, while $76B is a service deficit with the US and $319B goods deficit with China. Thus Trump admin often pointed out the EU as an export proxy for China. Various Trump officials also maintain the same Chinese proxy concept for Mexico, Canada, Vietnam, and even partly India.

Further, Trump reiterated his tough EU stance later in the White House:

·       I could talk about delays to EU tariffs if they start moving plants to the US

·       Trump on EU 50% Tariff: I'm not looking for a deal, it's set at 50%

·       Talks with the EU are slow-moving

·       The EU has been very difficult to deal with, recommending a 50% tariff on the European Union.

Trump often describes the EU as ‘mini China and is nastier than China’ in trade dealings, asserting that the U.S. holds “all the cards” and accusing the EU of treating the U.S. unfairly. He emphasized a hardline stance, warning that if the EU “gets cute,” they could lose access to the U.S. market for cars, signaling an aggressive approach to negotiations. He criticized the EU, alleging it was formed to “take advantage of the United States on trade” and dismissed their latest trade proposal as insufficient.

The EU had recently proposed a revived trade deal, including concessions like lobster exports, but Trump’s announcement came after trade talks reportedly broke down. Polish Deputy Economy Minister Michal Baranowski described the tariff threat as a negotiation tactic, expressing hope for a balanced agreement.

Current Status of US-EU Trade Deal Negotiations:

Negotiations between the U.S. and the EU remain strained, with limited progress. The EU has been trying to avoid a full-scale trade war since Trump imposed a 10% baseline tariff on EU goods on April 2, 2025, alongside 25% levies on cars, steel, and aluminum. These tariffs were initially set at 20% but scaled back after market turmoil, with a 90-day pause on higher “reciprocal” tariffs to allow talks, set to expire in early July 2025. If no deal is reached, tariffs could rise to 20%.

The EU has proposed concessions, including regulatory easing, joint efforts to address Chinese overproduction, and increased purchases of U.S. liquefied natural gas (LNG) to address Trump’s concerns about the transatlantic trade deficit. A recent EU proposal on May 22, 2025, included phased tariff cuts on non-sensitive goods and cooperation in energy, AI, and digital infrastructure, but Trump rejected it as inadequate.

Despite some positive signals, such as a U.S. letter responding to EU concessions in mid-May, negotiations have not advanced significantly. The EU Trade Commissioner has met U.S. officials multiple times, but Brussels fears being sidelined as the U.S. prioritizes deals with other nations like the U.K. and China. The EU has prepared retaliatory tariffs on €108 billion of U.S. goods, including aircraft and autos, but prefers negotiation over escalation. However, EU ministers have rejected a U.K.-style deal that accepts the 10% baseline tariff, insisting on a more comprehensive partnership.

Sentiment and Challenges:

Trump’s rhetoric, including claims that the EU must “pay a lot of money” for past and present trade imbalances, has been labeled as “extortion” by some EU observers, complicating talks. The EU is balancing a desire to negotiate with the need to maintain unity among its 27 member states, some of which, like Hungary, are more open to accepting baseline tariffs. The bloc is also pursuing alternative trade deals with countries like China, Mexico, and India to offset potential losses from U.S. tariffs. In summary, Trump’s latest comments indicate a hardening stance, with a threatened 50% tariff looming, while US-EU trade negotiations remain stalled, with the EU pushing for a deal but preparing for retaliation if talks collapse by July 2025.

Trump’s 25% Tariff on Smartphones (Apple and Samsung) 

Trump also announced a 25% tariff on smartphones manufactured outside the U.S., specifically targeting Apple and Samsung. He criticized Apple for manufacturing in India and pressed CEO Tim Cook to relocate iPhone production to the U.S., threatening a tariff if production remained abroad. This followed Trump’s broader trade agenda, including earlier tariffs on Canada, Mexico, and China, and was part of his push for domestic manufacturing.

Trump posted on his Truth handle on May 23, 2025, about the Apple tariff threat:

“I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S. Thank you for your attention to this matter!”

Nippon Steel and U.S. Steel Partnership:

On May 23, Trump announced a partnership between Nippon Steel and U.S. Steel after blocking their $14.9bn merger, which provided some positive sentiment for industrial sectors but did not offset broader tariff concerns Trump stated that "U.S. Steel will be controlled by the United States," likely referring to efforts to block foreign acquisitions or ensure domestic control, though specifics were not provided.

Trump’s Tariff Strategy:

Trump’s tariff threats appear to be a negotiation tactic, as Bessent’s comments suggest a push for “reciprocal” trade deals. However, the aggressive 50% EU tariff and 25% smartphone tariff escalated market fears, as they could disrupt global supply chains, raise consumer prices, and slow growth. The EU’s $236 billion trade deficit with the U.S. and plans for retaliation signal potential escalation.

The sharp stock market declines and dollar volatility may reflect an overreaction to tariff rhetoric, given Bessent’s assurances of upcoming trade deals. However, the lack of concrete progress in EU negotiations and the paused sovereign wealth fund plans added to the uncertainty. The combination of tariffs, rising Treasury yields, and Moody’s downgrade points to broader risks of inflation and deficit growth, potentially leading to stagflation, as warned by Federal Reserve Chair Powell.

As expected, Trump blinked on the 50% EU tariffs narrative after VDL called him.

On late Sunday, May 24, just before the opening of the Asian Session, European Commission President Ursula von der Leyen *VDL) had a telephonic conversation with US President Trump about the proposed 50% U.S. tariffs on EU imports. Following the call, which VDL described as "good," Trump agreed to extend the tariff implementation deadline from June 1, 2025, to July 9, 2025, giving the EU more time to negotiate a trade deal.

VDL emphasized the bloc's readiness to act ‘swiftly and decisively’ and also added that the EU would need until July 9 to finalize a deal, calling the EU-US trade relationship ‘the world's most consequential. VDL emphasized the EU’s readiness to advance talks “swiftly and decisively,” proposing a “zero-for-zero” tariff agreement on industrial goods. However, the tariff threat persists, and the EU is preparing potential retaliatory measures if negotiations fail.

On May 24, 2025, VDL Tweeted: “Good call with @POTUS.  The EU and the US share the world’s most consequential and close trade relationship.  Europe is ready to advance talks swiftly and decisively.  To reach a good deal, we would need the time until July 9.”

Subsequently, Trump also agreed to extend his tariff pause to the originally scheduled July 9, 2025. Trump tweeted late Sunday, just before the Asian Session opening of the US/Global futures market: “I received a call today from Ursula von der Leyen, President of the European Commission, requesting an extension on the June 1st deadline on the 50% Tariff concerning Trade and the European Union. I agreed to the extension — July 9, 2025 — It was my privilege to do so. The Commission President said that talks will begin rapidly. Thank you for your attention to this matter!”

Trump on China trade deal

On May 23, Trump commented on trade negotiations with China, stating they were "actively" ongoing, though he did not confirm direct talks with President Xi Jinping. He described China’s economy as "doing very poorly" due to 145% U.S. tariffs and dismissed the necessity of Chinese goods, suggesting consumers could do with fewer imports.

Trump on India trade deal:

Trump also mentioned that trade talks with India were a priority, with progress toward a potential deal, as noted in earlier April comments about a "zero-for-zero" tariff proposal on auto parts.  As per some reports, India and the US are close to a principle trade deal in 7-10 days. The US is likely to partially exempt Indian goods from 26% reciprocal tariffs. The US is likely to impose 10% tariffs on Indian imports while providing zero-duty treatment on some product lines. Trump's plan to impose a 25% tariff on Apple phones is unlikely to have a material impact on Apple manufacturing in India.

Trump’s Foreign Policy:

·       Iran: Trump stated he had "very good talks" with Iran and claimed "real progress" in discussions, though he provided no specifics on the nature of these talks or outcomes.

·       Russia and Ukraine: On May 20, Trump commented on a two-hour call with Russian President Vladimir Putin, stating that Russia and Ukraine would "immediately start negotiations toward a ceasefire." He emphasized not wanting to "spin wheels" on stalled talks.

·       Gaza Hostages: Trump updated that three more hostages in Gaza had died, reducing the number of living hostages to 21 out of 59, calling it a "terrible situation" and noting efforts to secure their release.

Tax and Spending Bill

On May 23, Trump delivered a blunt message to Republican holdouts on his tax-and-spending cuts package, warning of primary challenges if they opposed the bill or blocked it from reaching the House floor. He emphasized urgency, stating he wanted the bill to pass "now." The House passed the package early that morning. On May 25, Trump commented that he believed the Senate would make "significant changes" to the tax bill, indicating ongoing legislative adjustments.

Trump’s Cryptocurrency Dinner: Conflict of interest and igniting the crypto bubble

Trump hosted a private dinner for top investors in his cryptocurrency meme coin on May 23 at Trump National Golf Club, which drew criticism from Democratic senators like Elizabeth Warren and Chris Murphy, who called it an "orgy of corruption" and raised concerns about conflicts of interest. Trump did not directly comment on the dinner, but was noted as using the presidency to promote his crypto ventures. Trump is basically promoting and boosting his family business and also his associates like Musk & others, but also risking both the vote bank and bigger note bank (corporate America) for Jim, and also the Republican party. Trump’s bellicose policies from tariffs to techs and immigration may cost him the Prized Trifecta in the November’26 Midterm election. The US economy is facing an imminent supply shock and uncertain policies amid Trump’s constant flip-flops on tariffs and other policies.

Highlights of Trump’s comments:

·       We had some very good discussions with Iran

·       Good discussions with Iran on nuclear

·       We made significant progress with Iran

·       Senate Responds Positively to Tax Bill

·       We had constructive discussions with Iran regarding nuclear

·       Good response from the Senate on the tax bill

·       EU's Von der Leyen requested an extension on a temporary halt

·       European Union's von der Leyen contacted and requested an extension on the pause

·       Agreed to extend the European Union's 50% tariff deadline to July 9

·       Disapproves of Putin's Actions

·       Trump voices displeasure over Putin's Situation

·       Displeased about Putin killing many individuals

·       We do not plan to produce t-shirts or socks in the United States

·       We plan to produce tanks and semiconductors in the United States

·       Tariff of at least 25% on iPhones (Apple), Samsung, and others, if not made in the US

·       Trump signs directives to revive US leadership in nuclear power

·       Big announcement today on nuclear energy. Nuclear is safe and environmentally friendly, and this order will make us a real power in this industry.

·       We're talking about big plants. The tech has come a long way in safety and cost.

·       We need tremendous electricity

·       Talks with the EU are slow-moving

·       Trump on EU 50% Tariff: I'm not looking for a deal, it's set at 50%

·       I could talk about delays to EU tariffs if they start moving plants to the US

·       We have numerous other deals ready to be signed

·       Trump on Apple: It'll be more, it will be Samsung too

·       If Apple and Samsung build a plant in the US, no tariff

·       Cook said he’d go to India, but there'd still be tariffs that way

·       If they're selling in the US, it needs to be built in the US

·       I don't want the consumer to pay the tariffs. Tariffs are helping, not hurting

·       Some products the US doesn't want to make, they're better elsewhere

·       I'm not looking for a deal with the EU, it's set at 50%

·       US Steel will remain in America

·       There will be a partnership between US Steel and Nippon Steel. The bulk of the investment will come in the next 14 months

·       The US Steel and Nippon Steel partnership adds $14 bln to the economy

·       Tariff policies ensure steel will be made in the US forever

·       I will hold a US Steel rally on May 30th

US Interior Sec. Burgum:

·       Four executive orders will attack nuclear regulations

·       We need energy dominance to win the AI race with China

·       The order requires a substantial overhaul of the Nuclear Regulatory Commission, which includes looking at staffing

Trump is now also eyeing on UK’s oil & gas reserves as part of a trade deal:

“Our negotiated deal with the United Kingdom is working out well for all. I strongly recommend to them, however, that to get their Energy Costs down, they stop with the costly and unsightly windmills, and incentivize modernized drilling in the North Sea, where large amounts of oil lie waiting to be taken. A century of drilling left, with Aberdeen as the hub. The old fashioned tax system disincentivizes drilling, rather than the opposite. U.K.’s Energy Costs would go WAY DOWN, and fast!”

Treasury Secretary Scott Bessent’s Comments 

Bessent sought to calm markets on May 23, stating that the U.S. would announce “several large trade deals” in the coming weeks. He framed Trump’s tariff threats as a strategy to push the EU to negotiate more urgently, emphasizing “reciprocal” trade terms. Additionally, Bessent announced that the Trump administration’s sovereign wealth fund plans were paused, which may have influenced market sentiment. Bessent’s comments were part of a broader effort to mitigate investor concerns about inflation and economic disruption from tariffs, following earlier statements where he downplayed inflation risks and noted Walmart’s commitment to absorb some tariff costs.

The US Treasury Secretary Bessent, who is less hawkish on Trump’s trade & tariff policy, also supports Trump’s 50% tariff threat on the EU as a negotiating tactic to address stalled talks and a perceived lack of quality in EU proposals. He hopes the threat will push the EU to offer better terms while reassuring markets of forthcoming trade deals with other partners. His stance reflects a blend of strategic pressure and optimism, consistent with Trump’s broader tariff-driven trade policy, though he avoids specifics to preserve negotiating room. Bessent also points out perceived internal divisions between various EU member states (countries) over Trump's tariff policies and tries to leverage them in the overall EU trade negotiations.

Trade dove Bessent is basically in charge of trade deal negotiations with China, while known trade hawk Navarro was in charge of Europe, the rest of Asia, and others, along with less hawkish US Trade Secretary Lutnick. But now Bessent may be in charge of Asia trade negotiations, including China, India, Japan, and South Korea.

Highlights of the US Treasury Secretary Bessent’s comments:

·       Trump believes EU proposals have not been of good quality

·       Trump's move is in response to the EU's slow pace on tariff discussions

·       We hope this lights a fire under the EU

·       The EU has a collective action problem as it’s a union of 27 member states (countries) having different trade priorities.

·       We would like to have Apple help the US make the semiconductor supply chain better.

·       I am not expecting the US Senate to change the budget bill much

·       We just have to be careful about the timing of the tax bill

·       We are far along with India in trade talks

·       Many Asian nations have come up with very good deals

·       Most countries are negotiating in good faith, including China, except the EU

·       The tax permanence from the Republican bill is going to offer certainty

·       We're aiming for a 3% or so fiscal gap by 2028

·       I am very optimistic about the outlook for the deficit

·       There is substantial revenue now coming in, thanks to tariffs

·       Over the next couple of weeks, we're going to have several large deals announced

·       I will be negotiating again in person with China

·       We may see a US-Germany reset (fiscally) under the new Chancellor, Merz

·       It is wrong to think bonds are moving on US Congress action; bond moves are global. I am not particularly worried about what the market is thinking.

·       I am not worried about US debt dynamics.

·       I wouldn't necessarily categorize this as a weak dollar, other countries' currencies rising, but the dollar is not falling.

·       There is a lot of resistance to government spending cuts

·       Bessent on the US deficit: Let's wait and see the Trump plan play out

·       Deregulation is to kick in for growth in Q3-Q4, 2026

·       We want to make the US the most attractive for capital

·       We're very close to moving the supplementary leverage ratio (SLR); we could see SLR move over the summer (for banks)

·       A shift in SLR could have an impact on treasury yields

·       An SLR shift could bring down yields by tens of basis points

·       Bessent ultimately sees 'several hundred billion' per year in tariff revenue

·       When trade deals are sorted, we can focus on the privatization of Fannie Mae and Freddie Mac

·       We had above-target tax collections this filing season

·       The G7 was very concerned about imbalances around China

·       The sovereign wealth fund is on pause

EU response to Trump’s 50% tariff rhetoric:

The EU's response to Trump's May 23, 2025, threat of a 50% tariff on EU goods starting June 1, 2025, has been measured but firm, emphasizing negotiation while preparing for potential retaliation & escalation. The European Commission, the EU's executive body, declined immediate comment on the threat, awaiting a scheduled call between EU Trade Commissioner Maroš and U.S. Trade Representative Greer later that day.

EU leaders expressed concern and disappointment. Irish Taoiseach Martin called the threat “enormously disappointing” and “very damaging,” noting it was unexpected given a 90-day tariff pause until July 8, 2025, meant to allow negotiations. He stressed the EU’s good-faith efforts for a negotiated settlement, highlighting the dynamic EU-U.S. trade relationship. French Trade Minister Laurent Saint-Martin stated that Trump’s threats were unhelpful during negotiations, maintaining a stance of de-escalation but readiness to respond. Polish Deputy Economy Minister Michal Baranowski, representing the EU’s rotating presidency, downplayed the threat as a negotiating tactic, suggesting ongoing talks could continue until early July and expressing optimism for a balanced deal.

The EU has been preparing countermeasures since earlier U.S. tariff actions. On May 8, 2025, the European Commission proposed retaliatory tariffs on up to €95 billion ($107.2 billion) of U.S. imports, targeting goods like wine, bourbon, aircraft, and car parts, with a public consultation open until June 10, 2025. Previously, in April, the EU approved a €21 billion retaliatory package against U.S. steel and aluminum tariffs, set to take effect in stages but paused to facilitate talks. European Commission President Ursula von der Leyen reiterated the EU’s preference for a “fair, balanced deal” but warned of a firm response if negotiations fail, citing a “zero-for-zero” tariff offer rejected by the U.S.

Some EU diplomats believe the U.S. may insist on maintaining a 10% baseline tariff, which many EU trade ministers reject, potentially triggering further retaliation. The EU is also exploring alternative trade deals with partners like Mexico, India, and China to mitigate potential losses. But the EU is still prioritizing dialogue to avoid an all-out Trump trade war, but is also ready with retaliatory measures if Trump’s 50% tariff threat is implemented, balancing negotiation with preparedness for escalation.

Trump’s 10% basic tariff with 0% Federal VAT is equivalent to the EU’s 2.5% tariff with 7.5% Central VAT:

Unlike the EU, India, China, UK, Japan, and most other countries, the US has no Federal VAT/GST/Sales Tax on goods & services; but most of the US states do charge around 7.5% state sales tax (POS), while most other major US trading partners (countries) do have both Federal and state sales tax divided 50:50 or 75:25 or 60:40 on an average 15% VAT/GST. Most of the other countries also have Federal VAT/GST on imported goods (IVAT/IGST) at lower rates compared to the Federal VAT/GST rate, with an input tax credit (ITC) mechanism to ease the burden on businesses and consumers.

But in the US, that’s not the case. Trump is now also targeting the internal VAT/GST system for US goods to match overall US tariffs. Trump is emphasizing 10% minimum US tariffs to match with 2.5% tariffs prior (in line with EU/AEs) and the 8.0% average Federal VAT by other countries. Trump may also introduce a 15% standard Federal VAT/GST in the US with 50% sharing for states and no separate state sales tax, rather than 10% basic tariffs. Trump is opting for a 10% minimum tariff policy with a threat of 25% to 50% additional tariffs to force manufacturing back into the US to feed US consumption first and then export the rest.

Trump believes in localization rather than globalization:

To become an affordable manufacturing hub for Americans, who are used to cheaper imported goods from pens to computers and smart mobiles, this may not be easy. Trump needs proper industrial and logistical infrastructure to match with mighty China so that Made in America goods can compete with China or another efficient manufacturing hub. There is also a factor in labor wages, as the US labor cost is significantly higher than China or other EM manufacturing hubs.

To cope with this high labor cost issue, Trump is relying on an almost 100% robotic manufacturing policy in the US. For example, Trump is emphasizing Apple and Samsung to make smartphones in the US for Americans with the help of robot labor rather than in India China, or any other country; otherwise, Trump may impose even 25% tariffs on Apple products, which would be paid by Apple or the concerned exporter country (India/China).

But Apple is already using such robotic manufacturing facilities in China, and even if it uses the same in the US, the iPhone will be a minimum of 10-20% costlier than in China, and ordinary Americans may not afford to spend an additional $100-200 on the iPhone. Also, the US lacks a completely integrated supply chain and has to import various parts, including basic raw materials like rare earth minerals from China, to produce electronic items from mobiles to jets. Even China imports various raw materials or parts from the US and other countries for its manufacturing, which is now quite normal under a globally integrated supply chain. But Trump believes in localization rather than globalization, which may not be possible in today’s age. Trump is also acknowledging the fact now. He is now stressing automobiles, steel, chips, mobiles, laptops, and pharmaceuticals production in the US, citing national security, trade deficit, and employment issues.

The US needs higher tax revenue, like a Federal GST/VAT:

The US collects tax revenue of around 5% of nominal GDP against India’s 20% and 10-15% by most other AEs, including China and the EU. Trump can collect around $300=500B annually from his 10-15% basic tariffs (on around $3T imported goods). But if Trump imposes 15% Federal VAT/GST on $20T worth of US consumption of goods and services, then the VAT/GST collection would be around $3T, almost 10% of US nominal GDP; the overall revenue in line with present tariffs and income tax structure would be 15% of nominal GDP, in line with AEs.

As per US Treasury Secretary Bessent’s recent comments, the US may adopt a Federal VAT/GST policy after a few years of high tariffs. ensuring adequate US manufacturing. The US may be targeting 2028-30 to reduce tariffs from 10% to 5%, along with the introduction of a Federal VAT/GST 15% on all goods & services with a 50:50 ratio sharing with states (in line with the India model).

Tariff Man Trump is a deal maker, not a deal breaker:

Trump’s 50% EU tariff is just a threat and negotiation tactic to get trade & tariff deal concessions from the EU. Like China, the EU may not like to negotiate with the Trump administration at gunpoint. Trump may soon blink again as too much hawkish rhetoric on the EU may bring it closer to China in trade & diplomacy/geopolitical issues, leaving the US alone. Trump’s bellicose tariff policies may cause the US to decouple from the rest of the world, rather than Chinese decoupling, which Trump is desperately seeking. Even India may revolt against Trump/US and shake hands with China. Trump is trying to change the internal system of other countries in line with US philosophy, like no Federal VAT/GST, which is not possible. Trump’s 10% minimum tariffs are equivalent to the EU’s 2.5% basic tariffs plus 7.5% average central VAT.

Conclusions

Trump may soon scale back his bellicose comments about EU 50% tariffs and may go for a UK-style trade deal with the EU, with some concessions from both sides. The US and EU both need each other for translantic economic prosperity & development. Both the US and EU need closer coordination to ‘confront rising China and Russian geopolitical threat’. Despite Trump being a Russian asset or sympathizer, Trump also can’t afford to decouple from the EU and NATO countries for various geopolitical, economic, and trade-related issues. Trump’s overall hawkish tariff & trade narrative is a negotiation tool to get a better trade deal for US exports and also to promote the ‘Made in America’ theme. Even India, China, the EU, and most of the other countries have some tariffs and non-tariff barriers to encourage domestic manufacturing to boost local employment and reduce dependency on other countries, friends/allies, or foes/adversaries.

Bottom line

Trump was ready to blink on the EU, as his 50% tariffs on the EU were designed to get favorable deals and concessions. Thus, Trump readily agreed to VDL as, eventually, Trump tariffs have to be borne by the American public/SMEs (vote bank) and corporate America (note bank).

Market wrap:

On Friday, May 23, Wall Street Futures slumped on Trump’s EU and Apple tariffs, but recovered from the panic low on hopes of other tariff deals and assuming that these are all Trump’s negotiation strategy. On early Monday, April 26, Asian Session, Wall Street Futures recovered after the simultaneous announcement by both VDL and Trump about the commitment to a trade deal and extension of tariff pause till July 9, 2025, the original deadline; although Trump is set to extend his tariff pause till at least Dec’25, if not permanently.

Tesla robotaxis will hit the streets in June; Tesla CEO Elon Musk says his company will begin to roll out a fleet of self-driving taxis in June; Tesla got some boost. Nuclear stocks rally as Trump signs executive orders to support industry. Trump signed an EO for higher Nuclear energy-generated electricity to meet the growing demand from AI, Crypto, and other US tech & industrial sectors. Apple dropped after Trump’s tariff threat, weighing heavily on major indices. Other tech firms like Samsung were also targeted, contributing to the tech sector weakness.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 41400) now has to sustain over 41800 for a further rally towards 42000/42500-43000/43300* and 43500*, and even 44600-45200 in the coming days; otherwise sustaining below 41700, DJ-30 may again fall to 41000/40600-4010039900 and 39700/38600-38000/37700-37300/37000 in the coming days.

Similarly, NQ-100 Future (20200) has to sustain over 20800 for a further rally to 21100/21400-21700*/22000* and 22400-22600 in the coming days; otherwise, sustaining below 20750/20600-20500/20400, NQ-100 may again fall to 20000/19600-19400/19200 and 19100/18800-18600/18000-17600/16400 and 16200-15800 in the coming days.

Also, technically Gold (CMP: 3240) has to sustain over 3275-3300 for any recovery to 3325/3375* and 3400/3425-3450/3505*, and even 3525/3555 in the coming days; otherwise sustaining below 3290-3275, Gold may again fall to 3255/3225-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.