8th July 2025

Hi Simon,

Following the reciprocal tariff extension announced on Monday, Morningstar's International Economist, Grant Slade, has provided the following insight on what this means for the US.

"Trump has extended the grace period of his proposed reciprocal tariffs, announcing that they will now go into effect on August 1. The three-week extension to the original July 9 deadline allows Washington greater time to negotiate with its trading partners, with just three trade agreements struck, to-date. The US also issued letters to a range of its trading partners - including Japan and South Korea - clarifying the tariff rate that would prevail on their exports to the US come the start of August. The newly proposed set of tariffs largely align with those originally put forward by Washington on April 2. 

Notably, the US remains open to negotiating these new tariff rates downward. This appears a plausible outcome, with the threat of further financial market turmoil likely to limit Trump’s ability to re-escalate his trade war in full. Still, we still see risk to the US economy should tariff rates ultimately revert to, or near, levels proposed by Trump on April 2. These include a significant increase in inflation, and a slowdown in growth at best or recession at worst."

If you would like to discuss this further, please let me know.

Best wishes,

Mia