Key Points:

• President Trump has escalated his tariff threats, alerting 14 nations about impending higher tariffs effective August 1.
• Market participants are skeptical of Trump’s threats, believing he may yield to negotiations.
• U.S. stock markets and Bitcoin have shown minimal response, stabilizing after minor fluctuations.

U.S. President Donald Trump has amplified his rhetoric regarding tariffs this week, yet financial markets remain unconvinced, likely anticipating that he will retreat and ultimately strike a deal with trading partners.

Earlier this week, the Trump administration delivered letters to 14 nations warning of increased tariffs on their goods exported to the U.S. starting on August 1st. The initial 90-day suspension on tariffs was set to conclude on July 9. On Tuesday, Trump announced on Truth Social that the August 1 deadline would not be postponed, and new tariffs would be introduced as planned.

Trump’s Discussion Trump delivers a message in a recorded video (Nikhilesh De)

However, market sentiments suggest a belief in the saying that Trump often backs down, observable in the current steady expectations regarding U.S. interest rates.

As this article is being drafted, the CME FedWatch tool is indicating expectations for two rate cuts of 25 basis points this year, with the first anticipated in September. The market even discounted the July rate cut following a stronger-than-expected jobs report last Friday, maintaining this hawkish outlook amidst Trump’s tariff threats.

Unlike in March, when Trump’s tariff warnings prompted a flurry of expected rapid rate cuts in June, traders now seem to forecast an indefinite pause in the tariff deadline, leading to further negotiations and trade agreements as noted by ForexLive.

The MOVE index, which reads the options-based 30-day implied volatility of U.S. Treasury notes, is declining, in stark contrast to earlier this year when trade war apprehensions drove the index sharply upwards.

In other market developments, stocks and Bitcoin have shown little concern for Trump’s recent threats. The S&P 500 dropped slightly by 0.8% to 6,210 points on Monday but quickly stabilized at 6,225 on Tuesday, while Bitcoin has been trading just over $105,000 according to CoinDesk’s data.

The dollar index, gauging the USD’s value against major currencies, appreciated by 0.55% to 97.60 on Monday, sustaining stability around these figures.

Read more: Key Market Dynamic Keeps Bitcoin, XRP Anchored to $110K and $2.3 as Ether Looks Prone to Volatility