No Rest For The Wicked

 Just as people breathe a sigh of relief that what looked like the beginning of WW3 ended up being something (for now) less than, something from the recent past has resurfaced: The Tariff War.

On April 9, President Donald Trump announced a 90-day pause on all "reciprocal" tariffs imposed by the US, excepting those on China. As Morgan Stanley notes, July 9 is the next deadline for tariff negotiations. Markets are waiting to learn how Trump will approach this next phase.

There are three chief reasons tariffs could come roaring back into view for investors.

1. Geopolitics has overshadowed the trade war recently. The Israel-Iran conflict in recent weeks has taken up a lot of investors' focus, but the risks from that event appear to be dwindling. The next shoe to drop with regard to volatility is likely to be the next chapter of the trade war.
2. Tariffs' effect on inflation may be lagged. Economists caution that the data in recent months showing inflation cooling might not last. That's because the impact of tariffs on prices could be slow to show up, Morgan Stanley said, adding that they see inflation potentially picking up later this summer.
3. Fed policy could be complicated by the lagged impact of tariffs. Markets—and Trump—have been clamoring for lower interest rates, but if inflation rears its head, that'll be another reason for the Fed and Chairman Jerome Powell to keep rates steady.

Don't be too worried; out of the 90 countries impacted by the Trump Tariffs, one trade deal has been signed.