US President Donald Trump’s decision to delay new tariffs has only prolonged the uncertainty weighing on global sharemarkets, according to AMP chief economist Shane Oliver.
While the White House has extended the deadline for trade negotiations to 1 August, the limited uptake – with only two deals struck in the 90 days since talks began – suggests global appetite remains weak.
Speaking to Super Review’s sister brand InvestorDaily, Oliver said Trump’s latest move – including letters sent to global leaders urging last-ditch negotiations and threatening higher tariffs – shows the threat of tariffs remains very real.
“I am pleased to announce that the UNITED STATES TARIFF letters, and/or deals, with various countries from around the world, will be delivered starting 12:00pm (Eastern), Monday, July 7th,” Trump wrote on Truth Social.
“Thank you for your attention to this matter! DONALD J. TRUMP, President of The United States of America.”
For Oliver, “the threat is still hanging”, with the economist warning that many countries could ultimately face tariff rates exceeding 10 per cent.
Despite the extended period of uncertainty, Oliver noted that sharemarkets have held up well in response to President Trump’s latest tariff delay.
“Sharemarkets are kind of relaxed about it, because they’re thinking, ‘Well it’s all about negotiations, at some point Trump will back down’,” he said.
Looking forward, however, Oliver believes there is still a great risk of another market correction – though likely less severe than the April sell-off.
“We had a good bounce from the April lows to new highs … July is traditionally a strong month for shares, but then we get to August, and we’ll find that those high tariff rates – whatever Trump announces – will kick in and then markets might start to worry about it,” the chief economist said.
“I wouldn’t be surprised if we see another correction. It may not be as bad as the one we got into April, because markets are more attuned to it, so are investors, and there is this understanding that if things go badly, Trump will back down.”
Highlighting the so-called “TACO” phenomenon – that “Trump Always Chickens Out” – Oliver said the President’s pattern of policy reversals remains front of mind for investors.
Back in May, a Financial Times financial commentator, who coined the bold TACO theory, pointed out that the Trump administration is happy to put forward as many aggressive trade policies as it likes – until the economy and markets get too close to boiling over.
“The hard thing is always to work out what President Trump’s initial statement will be that upsets markets, so that’s always going to be hard to predict,” Oliver told InvestorDaily at the time.
“Once it happens, though, the evidence suggests that he often backs down or softens,” the economist noted. “[TACO] is consistent with Trump punching someone in the nose, then backing away.”
Oliver elaborated at the time that investors are not the only ones to take notice of this trend set by the President, with whole economies also identifying this habit and perhaps feeling less vulnerable because of it.
“Foreign governments might conclude that Trump always backs down, so what’s the point of approaching? What’s the point of negotiating?” the chief economist said.
“In the case of China, for example, where there was a back down, China didn’t even show any inclination to negotiate with the US, which approached China. And it seems to me that Trump gets fearful that economic consequences would be significant, so that he’s forced to back down, whether you call that chickening out or not.”
