Good morning investors. Tariffs are, once again, the headline news of the day. Yet beyond the geopolitical implications, markets are arguably more focused on how the rollout impacts the agenda of the Federal Reserve, which has come under increasing scrutiny from bulls and bears alike.

Investors’ two-headed battle

President Trump just reminded Wall Street the trade war never really ended.

On Monday, stocks slipped across the board after Trump announced a sweeping new round of tariffs on imports from South Korea, Japan, Malaysia, Kazakhstan, South Africa, Laos and Myanmar.

According to letters he posted on Truth Social, those countries face blanket tariffs ranging from 25-40%, with some rates subject to negotiations. 

The president also pushed back the previous July 9 deadline for trade deals to August 1.

The VIX — Wall Street’s fear gauge — spiked nearly 5% before paring gains, foreshadowing that volatility could intensify as trade tensions and retaliation risks mount.

That leaves investors staring down a two-headed policy risk — tariffs and a Federal Reserve that’s hesitant to cut rates. 

Fed Chair Jerome Powell has repeatedly warned tariffs could push inflation higher. But so far this year, CPI has come in cooler than expected every month.

At the same time, a growing chorus of market-watchers believe the labor market has deteriorated enough to justify more accommodative policy.

Still, Marta Norton, chief investment strategist for Empower Investments, said the latest tariffs do in fact support the Fed’s “wait and see” stance.

Given the trade deadline keeps getting pushed back, policymakers have to wait longer for clarity on the economic impact of tariffs, she said.

“Our stance all along has been that corporate profits, and therefore growth, would get hit harder by tariffs than inflation, since the passthrough to consumer prices wasn't a guarantee,” Norton told Opening Bell Daily. 

The central bank releases minutes from its June meeting on Wednesday, and investors will be parsing every word for any hints of a dovish shift. 

Market odds for a rate cut in September slipped to 62% on Monday from 75% a week ago, according to CME data.

Traders see almost zero chance of a July move.

As Opening Bell Daily reported Monday, Wall Street remains broadly upbeat for the second half of the year, though much of that optimism rests on expectations for multiple rate cuts. 

Add in fresh tariff uncertainty and the outlook turns murkier. 

Treasury Secretary Scott Bessent suggested more trade deals could be announced this week. If Powell interprets new tariffs as inflationary enough to delay rate cuts, the Fed could find itself in a familiar position behind the curve.

Market snapshot

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Elsewhere

📊”Anti-American” BRICS nations could see extra tariffs. That’s according to President Trump, who’s comments followed the BRICS meeting in Rio de Janeiro this weekend. Those countries could face an additional 10% levy from the US. (CNBC)

📈 Traders expect more volatility from CPI rather than tariffs. Options markets are pricing in a 0.6% move for the S&P 500 on the original tariff deadline day, July 9. That’s smaller than the 0.8% swing in either direction expected on July 15, when the next inflation report is due. (WSJ)

📉 Elon Musk has lost $69 billion in personal wealth. It currently hovers at $363 billion, down from $432 billion at the end of 2024. The drop in Tesla stock accounts for much of that decline, and further losses could follow as Musk pursues the launch of a new political party. (Barron’s)

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Rapid-fire

• China accounted for just 8% of US smartphone imports in May, down from 67% a year ago (Barron’s)

• Since December 2024, the share of China’s exports going to the US has declined from 15% to 9% (Apollo)

• Old-school traders are getting their day in court against CME for the launch of electronic markets (WSJ)

• Amazon will run an extended Prime Day from July 8 to the 11th for the first time ever (Barron’s)

• Wall Street expects portfolio resilience and policy risk to define the second half of 2025 (Opening Bell Daily)

• Stock allocations are exploding for US households as the dollar weakens (Pomp Letter)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].