Trade Secrets

WTF Dailies July 28, 2025

The United States and European Union have reached a landmark trade agreement that includes a 15% tariff on EU goods entering the U.S., President Donald Trump announced Sunday while in Scotland.

Sage Kakkat

27 Jul 2025 — 8 min read

US stock futures edged higher Sunday evening as investors braced for a packed week featuring earnings from Big Tech heavyweights, a Federal Reserve meeting, inflation data, and President Trump's Aug. 1 deadline to lock in key trade deals.
The United States and European Union have reached a landmark trade agreement that includes a 15% tariff on EU goods entering the U.S., President Donald Trump announced Sunday while in Scotland.
The broad-strokes deal encompasses significant EU purchases of U.S. energy and military gear, along with substantial investments in the American economy.
According to Trump, the European Union has committed to purchasing $750 billion worth of energy from the United States. He also stated that the EU has agreed to make $600 billion in investments in the U.S.
"They are agreeing to open up their countries to trade at zero tariff," Trump told reporters. He added that the EU would "purchase a vast amount of military equipment" from the U.S.
European Commission President Ursula von der Leyen confirmed the agreement would include 15% tariffs across the board, noting that this measure would help "rebalance" trade between the two major trading partners. Of the $3.3 trillion in goods imported by the U.S. last year, more than $600 billion came from the 27-member EU.
The pact could help bring some calm to markets, who had been wary that both sides would fail to reach an deal before August 1, when Trump’s sweeping "reciprocal" tariffs are due to come into effect. The EU had been facing heightened levies of 30%, and had reportedly been pushing for a zero-for-zero agreement with the White House.
In a note, Pepperstone Senior Research Strategists Michael Brown said the agreement "not only removes a key left tail risk that the market had been concerned about, but also yet again reiterates that the direction of travel remains away from punchy rhetoric, and towards trade deals done." Brown added that euro is likely to see "notable upside."
European automakers are also seen as a big winner of the deal, Brown argued, pointing out that the 15% tariff applies to car imports into the U.S., which is "a similar carve out to that achieved by Japan" earlier this month.
"Other obvious winners include U.S. defense names, given the EU’s purchase commitments on that front, as well as U.S. energy stocks," Brown said.
Meanwhile, von der Leyen clarified that the 15% tariff will apply to pharmaceuticals, but flagged that more could be coming from the United States on the matter. Trump has been threatening to slap steep duties of as much as 200% on drugs incoming from the EU, presenting heavy and possibly damaging headwinds to the region’s key pharmaceutical industry.
The deal comes ahead of what analysts at ING have described as a "massive" week for the U.S. economy. Along with a possible flurry of trade deals before August 1, the coming days will see a raft of corporate earnings, including results from mega-cap tech titans like Facebook-owner Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN).
A reading of inflation closely monitored by the Federal Reserve is also scheduled to be released, while the Fed itself will unveil its latest interest rate decision on Wednesday. Fed officials are widely anticipated to leave borrowing costs unchanged, even as Trump has placed intensifying pressure on the central bank – and Chair Jerome Powell in particular – to quickly lower rates. Policymakers have recently signaled a "wait-and-see" approach to further rate decisions, partly citing uncertainty around the trajectory of Trump’s tariffs and their impact on the wider economy.
Asian stock markets struggled for direction at the start of a busy week, with the Nikkei index slipping ahead of the Bank of Japan’s rate decision, while Hong Kong led regional gains amid optimism over the U.S.–EU trade deal.
Despite trade cheer, most Asian markets posted only slight moves as investors remained cautious ahead of the August 1 deadline set by President Donald Trump.
Meanwhile, top U.S. and Chinese officials were scheduled to meet in Stockholm on Monday to resolve trade tensions and reportedly seek a three-month extension of their tariff truce. According to a South China Morning Post report, both sides are looking to extend the tariff truce before it expires on August 12, with no plans to impose new duties or escalate tensions.
Chinese markets opened higher but pared some gains to trade slightly lower. China’s Shanghai Composite index fell 0.2%, while the Shanghai Shenzhen CSI 300 also ticked down 0.2%.
Hong Kong’s Hang Seng index traded 0.5% higher after jumping over 1% in early trade.
South Korea’s KOSPI was largely unchanged. The country’s heavyweight stock Samsung (KS:005930) rose more than 3% after announcing a $16.5 billion chip supply deal, with a Bloomberg report naming the customer to be Elon Musk’s Tesla (NASDAQ:TSLA).
Elsewhere, Australia’s S&P/ASX 200 rose 0.3%, while Singapore’s Straits Times Index edged 0.2% lower.
India’s Nifty 50 also ticked lower, while the Philippines’ PSEi Composite jumped 1.3%.
Japan’s Nikkei 225 dropped 1% after recent one-year highs last week. The broader TOPIX index fell 0.5%.
The Bank of Japan is set to keep its policy rate at 0.5% when it meets on Thursday.
The central bank may offer a less pessimistic economic forecast following last week’s trade agreement with the U.S., indicating rate hikes could resume later in 2025
"Given the US-Japan trade deal struck this week, a big uncertainty factor has been removed. This could offer some relief for the BoJ," ING analysts said in a note. "Also, possible upward revisions of inflation forecasts should offer markets hints about the near-term rate outlook," they added.

Market Close

Equity markets hovered near the flatline, with the Dow closing slightly lower, while the Nasdaq notched its 17th record high of the year. Over the weekend the U.S. and EU reached a trade agreement, setting a 15% tariff on most EU imports, a development that provides investors a sigh of relief ahead of the August 1 trade deadline. With reports out last Friday that an agreement was in the works, stock prices likely already reflect the positive news. The most notable moves were in the currency space, as the U.S. dollar climbed the most since May, with notable strength against the euro. The dollar had tumbled earlier this year, but reduced trade uncertainty appears to be helping the currency stabilize.
Government bond yields rose modestly ahead of the Fed meeting this week, while oil prices climbed, as the U.S. administration shortened the deadline for Russia to end its war in Ukraine or face sanctions.
Tariffs and trade have been the biggest source of uncertainty this year, triggering a near-20% decline in stocks in April. But this fog is gradually clearing as more trade deals are announced ahead of the U.S. government's August 1 deadline.
The weekend agreement with Europe reduced threatened tariffs from 30% to 15% and included commitments to purchase $750 billion in U.S. energy and invest an additional $600 billion in the U.S. The lowered tariff rate will apply to cars, but steel and aluminum will continue facing 50% tariffs, while pharmaceutical and semiconductor tariff decisions remain pending. The reality is that tariffs will move higher for goods coming from the EU after next week, but the agreement helps avoid a trade war and helps provide clarity for corporations.
Next, the U.S. and China are reportedly set to extend their tariff truce by another 90 days when delegations from the two countries meet today in Sweden.
Despite the broadly positive sentiment, market moves are muted this morning ahead of a busy week of earnings and economic releases. Almost 40% of the S&P 500 companies are reporting results, including many among the Magnificent 7 (Microsoft, Meta, Apple, Amazon).
Key economic releases include the second-quarter GDP and the July jobs report, which comes after the Fed announces its policy-rate decision on Wednesday. Despite political pressures, Chair Powell is expected to continue to argue for patience and data dependence. If clarity on the tariffs improves further after August 1 and inflation data come in no worse than expected, a September cut is possible, with Powell potentially hinting at that at the Fed's annual Jackson Hole meeting on August 21-23.

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