Market Talk: Japan, South Korea tariffs could precede ‘pause’ for stocks | REUTERS
Trump’s trade deadline looms and Tesla shares tumble. Joining us today is Ross Mayfield of Baird. Ross, it is crunch time for Trump’s trade deals. What’s your reaction to the latest news of Trump’s letters to Japan and South Korea setting 25% tariffs on each with a new deadline of August 1st? I think it’s all part of the the maybe not plan, but part of the game, right? You have to put pressure on certain countries to kind of facilitate the action with other countries, right? There needs to be some sort of threat or leverage that the Trump administration can hold over the other 50 plus countries that are in theory having deals negotiated with them. Um, we know that there had been some issues with Japan um throughout the process and I think that they represent a perfect kind of target for Trump to place um maybe not punitive but but certainly exemplary or you know make an example of them as we work you know extend the deadline give some time for other countries to to set deals but show what could happen or what can happen if those deals aren’t reached. So I think it’s a a way to put some pressure and some leverage not just on Japan and South Korea but obviously the other countries that are being negotiated with as well. So speaking of those other countries, Trump took a swipe today at developing bricks and nations uh calling them anti-American and is threatening additional tariffs on those countries. Is that why we’re seeing stocks lower today? It’s certainly a big part of it. I think in general um the market had you know reaching all-time highs off of those April lows has a lot to do with kind of the walking back of the tariff rhetoric and so anytime that trade and tariff stuff pops back up and shows that the administration is not just going to pull it all back I think it’s a riskoff type of event. I I think the Japan and South Korea tariffs have a little more to do with it than the BRICS nation. Um the Trump administration has lobbed threats at countries who are talking about going away from the dollar um for for all sorts of reasons and I expect this to be part of their playbook for the remainder uh of their term. Um but the Japan and South Korea as big trade partners with the US I think that has a lot more to do with the riskoff nature of today’s move. Switching gears, Tesla shares were down about 8% today after Elon Musk said that he was starting a new political party which Trump called ridiculous. I feel like we keep asking this question, but do you think that the board members will finally lose their patience with Elon Musk and potentially oust him from Tesla? What do you think? It’s a good question. It’s hard to say. Uh Musk is so synonymous uh with both the Tesla brand and and his other businesses, SpaceX in particular, that I think it would be hard to there’s obviously an issue of of control as well. You know, if it wasn’t Doge and some of the other things, some of the side businesses, then it’s probably not going to be this. But it’s obviously a big hit to Tesla’s stock price to be in the direct sights of an administration that has shown to be punitive towards companies and and you know leaders who don’t kind of uh cooperate or or get in line with what they want. So I expect this to continue to play out. And then you know more more to that there’s just more competition uh in the EV space. So there’s there’s some headline issues with the leadership, but there’s also, you know, underlying structural factors uh that that are weighing on that business. When we look at the overall economy and markets, bulls say that the economy is doing pretty well, right? That inflation is moderating, that consumers are kind of hanging tough, that we had uh decent Q1 earnings. And then bears say, well, inflation is kind of the last reading, drifting a little bit away from the 2% goal of the Feds and that consumer confidence is weak. Which are you, Buller Bear? I landed the bull camp. I I I think the momentum, the breadth, the participation both in the US and abroad um coming off those April lows really portend stronger turns over the next, you know, call it 6 to 12 months. Now, could we take a pause here? tariffs popping back up, you know, kind of heading toward a seasonally weak period in the fall. Sure, I I think that makes all the sense in the world to catch our breath. Some sentiment indicators have moved from being an asset to being a little bit of a a headwind here as people have gotten more bullish. But by and large, I think the corporate earnings picture is the thing that needs to be focused on and is fallen by the wayside with all the tariff and geopolitical debates. Um, earnings in Q1, I I don’t think they were just good. I think they were quite strong. Um despite all the tariff rhetoric and everything that’s been thrown at uh corporate operators, we’re looking at earnings growth of 9 to 10% in 2025. That’s strong. Um and is necessary to justify pretty high valuations. So I land in the bull camp. I think there’s a lot to like. I think the Fed is still cutting uh this year. I think inflation is moderating pretty pretty nicely. So I think there’s a lot to like even if we might see a pause or a bit of a retreat over the next couple months.
President Trump slapped 25% tariffs on Japan and South Korea and Tesla shares sank after Elon Musk floated a new political party. Ross Mayfield from Baird investment explains what all this could mean for the markets.
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