Richard Warne, Senior Portfolio Manager, Copia Capital
The much-anticipated 1 August tariff deadline coinciding with corporate earnings season has proved to be an interesting barometer for market health. Barring some specific sectors that have found themselves exposed to tariffs and other factors, those that have reported earnings have generally performed well amidst the year’s turbulence.
Tariffs are an unavoidable factor of global commerce currently and this is unlikely to change for the rest of Donald Trump’s time in office. But as markets appear to have adjusted better and quicker expected, beneath the surface there are games and strategies at play that help us view the situation in a clearer context.
Not poking the bear to stop a bear
In 2024 US levies sat at 2% and although the worst of the ‘Liberation Day’ rhetoric has hasn’t actually come to pass so far, tariffs now sit an effective average rate of over 18%.
First thing to say is not many people will be happy with this outcome. But despite some grumblings about various deals, concessions and arrangements made before the deadline, in many cases the picture is not as bad as it could have been.
Since ‘Liberation Day’, what we’re finding is that market stress has been largely sectoral. Automobiles, steel and aluminium are key areas the US wants to reinvigorate stateside. Copper has taken a bit of a hammering, losing 22% of its value but remaining up in its year-to-date price.
Grumblings have been especially muted in the political sphere. Markets and governments alike – mainly typified by Europe, Korea and Japan – appear to be favouring the path of least resistance.
Their view is likely that limiting uncertainty will make for the best economic scenario and leaves more room to finetune and make deals in the future.
Corporate America remains resilient
Corporate America has been reporting strong performances during earnings season, led by the magnificent seven tech stocks and AI. Earning expectations were downgraded due to the uncertainty generated by tariffs and a desire to hold off investments until the situation became clearer. Again, there are some sectoral exceptions. Tariff exposed pharmaceuticals have not been keeping pace with other sectors. For example, Novo Nordisk reported poor earnings. They said (beyond tariffs) the underwhelming commercial performance of weight loss jabs, which has been a bit of a race to bottom in terms of prices, has also been a factor. The scale of competition in this multi-billion-dollar sector seems to be increasing.
Sectoral issues and tariffs aside, it looks as though corporate America has for the most part manoeuvred well around the noise.
US credibility going forward
Despite corporate strength, the current US administration’s behaviour domestically is prompting questions over its continuing credibility.
Trump has flirted with firing Federal Reserve Chair Jerome Powell, due to his reluctance to cut interest rates as quickly or as much as the President wants. There’s also tensions internally as two Fed board members dissented in favour of rate cuts, the first double dissenting in 30 years. The two have also publicly backed a dovish approach undermining the Fed and Powell’s general position.
The tension internally and externally is unpopular in markets as it would prompt concerns about the independence of the central bank and whether rates are politically influenced. Whenever Trump is at his most explicit about his intentions to remove Powell, the markets have reacted negatively.
Concerns were not eased last week when Trump fired, Erika McEntarfer, Head of the Bureau of Labor Statistics, on social media hours after a job report showed poor employment rates. He accused her of having been a “Biden appointee” and putting a political slant on the numbers.
This and removing Powell would present a precarious situation and independent official statistics could be viewed negatively by markets. It could potentially be a blow for dollar strength as well as US credibility.
Noise Resilience
With all that is going on, it’s easy to get consumed. But what’s noticeable with any success or failure that has come out of the tariff deadlines is the ability for countries to maintain resilience to the noise.
This has largely fallen in two camps. Firstly, those more strategically reliant on the US for security or trade like the EU, UK and Japan, have tried to avert any worst-case scenarios through dealmaking and trying to quell uncertainty.
Secondly, economies that are more independent like Brazil and China have stepped away from the US. They have taken advantage of America’s decreasing role in global trade to plug gaps in the market in agriculture (grains, soya, beef) and oil.
Those who have suffered have usually failed to hedge for noise and subsequent curveballs. Switzerland underestimated Trump’s position on its trade imbalance and assumed a deal with a similar condition to the EU would be fine and then were hit with a 39% additional rate.
This provides an allegory to approaching investment in the current climate: being diversified to protect from noise, consider alternatives and not trying to make judgements exposed to erratic geopolitical conditions.
It’s unlikely we’ve heard the last on tariffs and the volatility they create. But lifting the lid on what’s at work beneath the uncertainty can help to form a strategy that looks to protect against the noise.
13th August 2025
Peeking beneath the surface of Trump’s tariffs
Richard Warne, Senior Portfolio Manager, Copia Capital
The much-anticipated 1 August tariff deadline coinciding with corporate earnings season has proved to be an interesting barometer for market health. Barring some specific sectors that have found themselves exposed to tariffs and other factors, those that have reported earnings have generally performed well amidst the year’s turbulence.
Tariffs are an unavoidable factor of global commerce currently and this is unlikely to change for the rest of Donald Trump’s time in office. But as markets appear to have adjusted better and quicker expected, beneath the surface there are games and strategies at play that help us view the situation in a clearer context.
Not poking the bear to stop a bear
In 2024 US levies sat at 2% and although the worst of the ‘Liberation Day’ rhetoric has hasn’t actually come to pass so far, tariffs now sit an effective average rate of over 18%.
First thing to say is not many people will be happy with this outcome. But despite some grumblings about various deals, concessions and arrangements made before the deadline, in many cases the picture is not as bad as it could have been.
Since ‘Liberation Day’, what we’re finding is that market stress has been largely sectoral. Automobiles, steel and aluminium are key areas the US wants to reinvigorate stateside. Copper has taken a bit of a hammering, losing 22% of its value but remaining up in its year-to-date price.
Grumblings have been especially muted in the political sphere. Markets and governments alike – mainly typified by Europe, Korea and Japan – appear to be favouring the path of least resistance.
Their view is likely that limiting uncertainty will make for the best economic scenario and leaves more room to finetune and make deals in the future.
Corporate America remains resilient
Corporate America has been reporting strong performances during earnings season, led by the magnificent seven tech stocks and AI. Earning expectations were downgraded due to the uncertainty generated by tariffs and a desire to hold off investments until the situation became clearer. Again, there are some sectoral exceptions. Tariff exposed pharmaceuticals have not been keeping pace with other sectors. For example, Novo Nordisk reported poor earnings. They said (beyond tariffs) the underwhelming commercial performance of weight loss jabs, which has been a bit of a race to bottom in terms of prices, has also been a factor. The scale of competition in this multi-billion-dollar sector seems to be increasing.
Sectoral issues and tariffs aside, it looks as though corporate America has for the most part manoeuvred well around the noise.
US credibility going forward
Despite corporate strength, the current US administration’s behaviour domestically is prompting questions over its continuing credibility.
Trump has flirted with firing Federal Reserve Chair Jerome Powell, due to his reluctance to cut interest rates as quickly or as much as the President wants. There’s also tensions internally as two Fed board members dissented in favour of rate cuts, the first double dissenting in 30 years. The two have also publicly backed a dovish approach undermining the Fed and Powell’s general position.
The tension internally and externally is unpopular in markets as it would prompt concerns about the independence of the central bank and whether rates are politically influenced. Whenever Trump is at his most explicit about his intentions to remove Powell, the markets have reacted negatively.
Concerns were not eased last week when Trump fired, Erika McEntarfer, Head of the Bureau of Labor Statistics, on social media hours after a job report showed poor employment rates. He accused her of having been a “Biden appointee” and putting a political slant on the numbers.
This and removing Powell would present a precarious situation and independent official statistics could be viewed negatively by markets. It could potentially be a blow for dollar strength as well as US credibility.
Noise Resilience
With all that is going on, it’s easy to get consumed. But what’s noticeable with any success or failure that has come out of the tariff deadlines is the ability for countries to maintain resilience to the noise.
This has largely fallen in two camps. Firstly, those more strategically reliant on the US for security or trade like the EU, UK and Japan, have tried to avert any worst-case scenarios through dealmaking and trying to quell uncertainty.
Secondly, economies that are more independent like Brazil and China have stepped away from the US. They have taken advantage of America’s decreasing role in global trade to plug gaps in the market in agriculture (grains, soya, beef) and oil.
Those who have suffered have usually failed to hedge for noise and subsequent curveballs. Switzerland underestimated Trump’s position on its trade imbalance and assumed a deal with a similar condition to the EU would be fine and then were hit with a 39% additional rate.
This provides an allegory to approaching investment in the current climate: being diversified to protect from noise, consider alternatives and not trying to make judgements exposed to erratic geopolitical conditions.
It’s unlikely we’ve heard the last on tariffs and the volatility they create. But lifting the lid on what’s at work beneath the uncertainty can help to form a strategy that looks to protect against the noise.