Clarity Over Chaos: What Four Months of Trade Talks Reveal
In early April, the announcement of sweeping tariffs unsettled markets and dominated headlines. Concerns centred on the risk of retaliation, escalating protectionism, and lasting disruption to global trade. Our assessment at the time was more measured: we argued that the tariffs were primarily a negotiating tactic and that the eventual outcome would likely reflect compromise rather than confrontation. Four months on, this has been the case.
The turning point came with the 90-day pause announced on April 9th, which shifted the dynamic from confrontation to negotiation. Since then, a series of structured agreements has taken shape. The UK was the first to finalise a deal, reducing tariffs in May from 25% to 10% and setting an early precedent for compromise. China and the US initially agreed to a 90-day trade truce in May that significantly scaled back headline duties on both sides while negotiating a broader deal. This has since been extended to November. Japan and Korea both secured tariff reductions to 15% in return for investment pledges in the US. Vietnam and Indonesia have also negotiated more favourable terms while other countries like Canada, Brazil and India face higher rates which appear largely tied to political factors. Nonetheless, the common thread has been negotiation rather than retaliation.
Most notable was the late-July deal between the US and the European Union, which halved planned tariffs from 30% to 15% in exchange for ambitious EU commitments of $750 billion in energy purchases and $600 billion in investment. While presented as reciprocal, the deal has been widely interpreted as more favourable to the US, highlighting Europe’s relative export dependence and limited bargaining power. The US’s ability to secure comparatively advantageous terms has reinforced investor confidence in American equities, reversing some of their year-to-date underperformance, and underscored the leverage it holds in bilateral trade talks.
Tariffs, however, remain elevated. The average effective US tariff rate likely reaches between 15–20% by year-end, the highest levels since the early 1900s. This is significant and will undoubtedly impact business and households, but several mitigating factors should be noted. Many of the agreed rates are less severe than initially threatened, companies and countries have had time to prepare and adapt, and some increases are not yet in force, leaving scope for further adjustment. In practice, tariffs are proving high but manageable for now.
For investors, the lesson is clear. Markets respond more to uncertainty than to tariff levels themselves. April’s abrupt announcement created fear because it lacked clarity; subsequent agreements have outlined the rules of the game, and equities have responded accordingly as attention shifts back to fundamentals. This reinforces the importance of staying invested, diversified, and globally exposed. Trade policy likely remains a source of volatility, but the evidence of the past four months is that clarity, not perfection, is what markets value most.
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