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Pause on Trump's 'Liberation Day' tariffs expires on July

9

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Stocks have flourished despite tariff volatility

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Dollar has taken a hit

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Major exporters to US still awaiting clarity

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Gold rises on inflation risks, global unrest, US debt

worries

GDANSK/LONDON, July 4 (Reuters) - The deadline U.S.

President Donald Trump set for major trading partners to strike

deals with Washington or face hefty tariffs expires next week,

bringing to a close 90 days of volatility but leaving global

investors in the dark over what will happen next.

Trump's propensity to issue a threat, or impose a new

tariff, only to reverse course shortly afterwards has led to

turmoil over the past three months.

Investors, however, have now become somewhat inured to this

sort of policymaking on the fly. And, as a result, there is

little evidence at this point that many are preparing for

fireworks on July 9. Instead, most expect some kind of delay,

pause or compromise.

What that will look like, however, is anyone's guess.

Here is a snapshot of where major markets are now, relative

to where they were when Trump dropped his initial tariffs

bombshell on April 2:

TAKING STOCK OF STOCKS

Global stock markets have staged a strong recovery following

the intense volatility triggered by Trump's tariff announcement.

The MSCI World index, which fell 10% between

April 2 and April 9, the day Trump paused the tariffs, has hit

successive record highs and gained over 11% since the original

"Liberation Day" announcement.

Global equities got another boost in May, when the U.S. and

China reached a temporary truce, pausing many tariffs for

another 90 days. Geopolitical tensions, including Israel's

recent strikes on Iran and Washington's subsequent bombing of

Iranian nuclear sites, briefly reined in sentiment but have not

derailed the broader rally.

The S&P 500, which had lagged other major equity

markets earlier in the year, has closed those gaps, gaining over

10% since April 2, and is neck and neck with the MSCI

all-country index, which excludes the United States

.

There's an important caveat, however. The S&P has only hit

record highs in dollar terms. The weakness in the U.S. currency

has eroded the returns for overseas investors. In euro or Swiss

franc terms, for example, the index is still about 10% below

February's record high, while in pounds, it's 7% below the

sterling-denominated peak.

DOLLAR DECLINE

The U.S. dollar, widely regarded as the world's most

powerful and stable currency, has suffered a knock to its

reputation from Trump's tariffs and the subsequent 90-day pause.

The dollar index, which reflects the U.S. currency's

performance against a basket of six others including the euro

and the Japanese yen, suffered its worst first half of the year

since 1973, declining by approximately 11%. It has fallen by

6.6% since April 2 alone.

Against the currencies of some of the United States' biggest

trading partners, the decline has been even more marked. It has

lost some 8% against the euro and the Mexican peso

since then and 5% against the Canadian dollar.

Vincent Mortier, the CIO of Europe's largest asset manager

Amundi, said the euro has plenty more room to run, especially as

U.S. debt worries are also driving the dollar down.

"I won't be surprised if by the end of next year we start to

revisit the $1.30 level," he said, highlighting that at its 2008

peak, the euro got as high as $1.60.

FOR EXPORTERS, CERTAINTY IS THE PRIZE

European shares have more than recovered losses suffered

since Trump's "Liberation Day". But strength in the euro and

anxiety over tariffs have kept them below March's record highs.

Large exporting sectors such as pharma and autos, which make

up around one-third of EU exports to the United States, have

rebounded too, but have been more volatile.

Brussels is reportedly open to a U.S. deal that would apply

a universal 10% tariff on many of its exports, something several

investors would view favourably should it be confirmed. Citi

said markets risk being caught offside if tariffs are reimposed

at 20% or reach 50%.

"Trump is truly unpredictable, but if it's really around

10%, I think the markets will react very well," said Carlo

Franchini, head of institutional clients at Banca Ifigest.

The impact of the trade talks extends beyond Europe,

however, with automakers in Japan also being watched. Citi's

base case is for a sustained 25% tariff, while a surprise cut to

10% could unlock a 50% upside for Japanese auto stocks.

ALL THAT GLITTERS

Gold has featured as the hedge of choice against an

array of risks, from tariff-induced inflation, to geopolitical

risk and a shift away from the U.S. dollar.

The price has hit record after record, rising 26% so far

this year to around $3,330 an ounce. Gold has eclipsed bitcoin

, which has gained about 14% year to date, and even Nvidia ( NVDA )

, the maker of chips that power AI capabilities, whose

shares went parabolic last year and have risen about 18% this

year.

Since April 2, gold's ascent has gathered pace, fuelled by

purchases from central banks, fund managers and even

individuals.

A survey by UBS Asset Management this week showed 39% of

respondents said they planned to increase their gold holdings,

compared with 15% last year. The independence of the Federal

Reserve - whose chair, Jerome Powell, Trump has berated

repeatedly for not cutting interest rates fast enough - is one

of the key concerns cited in the survey.