As the US military war with Iran enters its sixth month, President Donald Trump has returned to a more familiar battleground: global trade.
Trump on Friday unveiled a new tariff plan targeting 60 trading partners, including the European Union, China, the UK and Canada. The latest wave of taxes — which went into effect at 12:01 a.m. ET Friday, replacing the 10% flat rate that expired on July 24 — went from 10% to 12.5%.
The initial market reaction on Friday was muted, as the tax renewal is highly anticipated by investors, given the expiration date of previous transactions. That is in contrast to the ‘shock and awe’ approach that underpinned the sweeping ‘Independence Day’ tax announced in April 2025, which sent markets crashing.
However, investors and analysts say the circumstances surrounding the latest tax cuts are markedly different this time around, coming amid a more challenging global economic climate than last year and supported by a different legal framework, which could jeopardize the lasting drag on markets.
White House confirmed
“The significance of this is twofold,” said Emma Moriarty, portfolio manager at CG Asset Management.
“Not only does it show the commitment of the Trump administration to the costs, but it shows this commitment against the background of the global energy shock and the increase of the bottlenecks in the sale of goods. They seem to be content to continue to charge new prices even when they increase the domestic markets. In the markets, the meaning should be clear: we have to put a position of low growth and the result of inflation. “said Moriarty.
The moves come as stock markets around the world continue to grapple with the impact of the ongoing conflict in the Middle East, which has seen oil prices rise above $100 this week as prospects for talks to end the war continue to dwindle.
“While the result will not be a complete shock to the markets, it is yet another uncertain source of uncertainty as sentiment is weighed down by renewed conflict between the US and Iran and concerns about cost levels in the technology sector,” said Russ Mold, director of investments at AJ Bell.
The White House administration was expected to seek an alternative to a new round of tariffs following the Supreme Court’s ruling in February that the previous tariffs were unconstitutional. This new attack is being conducted through Section 301 of the Trade Act of 1974, where officials cite alleged forced labor practices as justification for the new tax.
Specifically, countries that have accepted or committed to introducing the ban will face a 10% duty, while those that have not yet will be charged 12.5%, tariffs that affect 99.4% of American goods.
Alan Siow, head of EM corporate credit at Ninety One Asset Management, said the White House appears to be adapting to legal challenges and may be bracing for limited retaliation and no clear increase in inflation.
“These latest charges appear to be an increase in the opening price,” Siow said, adding that he expected some countries to respond in a limited way at first, holding off on further increases until the impact of the policy became clear.
Dragging forever in the markets?
Looking ahead, Martin Jacob, a professor of accounting and control at the IESE Business School in Barcelona, said the resumption of the tax points to the White House’s desire to keep the import tax as a “permanent feature” of American economic policy.
As previous temporary measures neared their expiration date, that put pressure on the White House to create more permanent tax regimes, Jacob explained. “So the latest moves represent more than just another salvo of short-term negotiations,” he added.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said the tightening of the new levies risks continuing pressure on markets.
“After a while, the dreaded T-word is back on investors’ lips,” Ryan said. “Moving to Section 301 removes the legal vulnerability that allowed the Supreme Court to reduce the previous round of import tariffs. With that legal loophole closed, markets may have to start pricing in a structural drag on global growth rather than negotiating short-term risk.”
Ryan added that attention is now turning to next week’s Federal Open Market Committee announcement, with the recent rise in oil prices raising the possibility that the Fed could raise interest rates later this year. That marks a shift from earlier expectations that it would hold firm until the end of the year before cutting in 2027, and Ryan expects policymakers to keep the option to leave open.
