US President Trump announced the implementation of reciprocal tariffs via tweets, stating that billions of dollars would begin flowing into the United States. He emphasised that these tariffs largely target countries that have benefitted from trade with the US for many years.
Last month, tariff revenue was reported at $30 billion, marking a 242% increase compared to the previous July. These funds are expected to contribute towards managing the growing US debt and deficit, though inflation concerns are also rising amidst these economic changes.
Market Uncertainty
With new tariffs now in effect, we are seeing a fresh wave of uncertainty in the markets. This is most visible in the CBOE Volatility Index, or VIX, which has climbed from a low of 15 to over 19 in the past week alone. For traders, this suggests it is time to consider strategies that benefit from these wider price swings, such as buying options instead of outright stock.
The idea that tariffs will increase inflation is gaining traction, and recent data supports this concern. The last Consumer Price Index report for July 2025 showed a month-over-month increase of 0.5%, well above the 0.2% that analysts had forecast. Because of this, Fed fund futures are now pricing in only a 40% chance of an interest rate cut by year-end, down from 60% just a month ago.
We should look closely at the sectors that get hit hardest by trade disputes. For example, November soybean futures have already dropped 8% over the last two weeks, which is a pattern we remember clearly from the 2018-2019 trade disputes. This presents a potential opportunity for bearish plays on agricultural ETFs or the futures contracts themselves.
Industrial and technology companies that depend on parts from overseas are also facing new risks. Companies with high import costs or major sales in the targeted countries are becoming vulnerable. Buying protective puts on broad market indices like the Nasdaq 100 can be a way to hedge against this specific supply chain risk.
Currency Markets
The currency markets will be another key area to watch in the coming weeks. A “strong America” narrative may give the U.S. dollar a short-term lift, but long-term trade friction could ultimately weaken it. We should watch currency pairs like the USD/CNY closely, as sudden moves there often signal bigger problems for the global economy.
