Despite months of trade tariff turmoil, the S&P 500 gained roughly 2.1 percent in July, reaching a new all-time high. Yields on the 10-year U.S. Treasury rose to 4.37 percent, up from 4.24 percent at the end of June, while crude oil climbed about 6 percent to nearly $69.70 a barrel.
The Federal Reserve left interest rates unchanged, maintaining its target range for the federal funds rate at 4¼ to 4½ percent. Corporate earnings have generally been solid, but markets were rattled by a sharp downward revision to recent U.S. job growth data.
The United States and the European Union have reached an agreement imposing a 15 percent tariff on most goods imported from the EU—down from the threatened 30 percent rate but still a substantial increase from the near-zero tariffs that existed previously. The key question now is who will ultimately bear the cost of these tariffs. If European companies absorb the expense, they may face reduced profit margins, potentially leading to job cuts. If the costs are passed on to consumers, higher prices could trigger secondary and even tertiary economic effects.
The U.S. also reached a parallel deal with Japan, setting a 15 percent baseline tariff on Japanese imports and securing a pledge of $550 billion in Japanese investment in the U.S. economy. However, shortly after the announcement, Japanese officials stated that Washington’s public description of the deal differed from their understanding of the terms, raising concerns about possible disputes down the road.
Separately, the U.S. and China agreed to a temporary trade truce. Under the arrangement, the U.S. will maintain 30 percent tariffs on Chinese goods, while China will continue retaliatory tariffs of 10 percent on U.S. exports. The truce is currently set to expire on August 12, 2025, but expectations are high that it will be extended.