If one is wondering why investors have shrugged off tariff threats out of Washington, look no further than the United States’ five biggest trading partners excluding China.
We’ll call them the Big Five—Canada, the European Union, Japan, Mexico and South Korea—and they account for 55.1% of U.S. imports, excluding China.
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It’s important to remember that the tariff threats that have been made against these nations are just that—threats. And they have come on top of additional sector tariffs that have been announced but not yet implemented, like the 50% levy on copper and 200% tariff on pharmaceutical products.
If the United States intends to address Chinese economic and geopolitical risks, it is highly likely that it is not going to impose between 25% and 35% tariffs on critical global trade and security partners like the Big Five, much less critical sector products.
And that is what underscores investors’ willingness to look past these announced trade taxes.
Should investors misread Washington’s intentions, though, and the repeatedly delayed tariffs take effect on Aug. 1, then risks of a late summer market selloff are likely higher than is generally perceived.
