Trump Issues New "Reciprocal Tariff" Order! Tax Rates Range from 10% to 41%, Multiple Futures Markets Adjust

The U.S. tariff policy is set for intensive developments, effective August 1st!

On that day, President Trump signed a new executive order further modifying the so-called "reciprocal tariffs" policy released in April of this year. The order adjusts the additional tariff rates on goods from multiple countries to address what the U.S. side refers to as a "national security emergency" caused by a long-term and severe trade deficit. According to Annex I, tariffs are set at 15% for countries such as Japan, South Korea, and New Zealand; Canada's rate is raised to 35%; and goods from countries not listed in Annex I are uniformly subject to a 10% tariff. For EU countries, if the current tariff on a product is below 15%, it will be supplemented to 15%; if it is above 15%, no additional tariff will be imposed. The executive order also stipulates that if goods are found to be transshipped through a third country to evade tariffs, a 40% transshipment tax will be imposed, and such cases will be included in an "evasion list" published semi-annually.

According to the executive order, the highest "reciprocal tariff" rate is imposed on Syria, set at 41%, with Myanmar and Laos at 40%. Brazil and the United Kingdom have the lowest tariffs, set at 10%. The tariff rate for most countries and regions is set at 15%. The tariff rate for Vietnam is set at 20%.

On the eve of the deadline, the tariff game accelerates.

According to CCTV News, on July 31 local time, the White House stated that Trump has signed an executive order to increase the tariff rate on Canada from 25% to 35%. The new tariff will take effect on August 1.

The White House stated in its announcement that the tax increase is "in response to Canada's continued inaction and retaliatory measures," and that the President "has determined it necessary to effectively address the current emergency situation by raising the tax rate."

In addition, a reporter from Futures Daily learned that on July 31 Eastern Time, Trump announced that the U.S.-Mexico tariff agreement would be extended for 90 days, meaning Mexico will continue to pay a 25% fentanyl tariff, a 25% automobile tariff, and a 50% tariff on steel, aluminum, and copper.

This means that the current tariff situation will continue. Goods from Mexico will be subject to a 25% tariff unless they comply with the United States-Mexico-Canada Agreement (USMCA) signed during Trump's first term. If the goods comply with the agreement, they will not be taxed, with the exception of special tariffs in certain industries.

According to CCTV News, on July 31 local time, several judges of the U.S. Federal Court of Appeals questioned the legality of Trump's implementation of "reciprocal tariffs" under the International Emergency Economic Powers Act (IEEPA), believing that it exceeded the authority granted by Congress and failed to demonstrate that the trade deficit constituted a "national emergency."

The case was brought by several states and businesses, and the court had previously ruled that Trump exceeded his authority. The case is expected to be appealed to the Supreme Court.

Stock index futures collectively pulled back; short-term trading may remain volatile.

Yesterday, all three major indices of the A-shares closed down, with the Shanghai Composite Index decreasing by 1.18%, the Shenzhen Component Index dropping by 1.73%, and the ChiNext Index falling by 1.66%. The trading volume of the two markets increased by 91.756 billion yuan compared to the previous trading day. Meanwhile, stock index futures collectively declined.

Regarding the decline in the stock market yesterday, Wang Ying, an analyst of equity and fixed income research at Nanhua Futures, stated that firstly, previously popular concept stocks experienced a correction, and the outflow of funds due to profit-taking led to the market downturn. Secondly, there have been no substantial positive policies recently, and the uncertainty surrounding U.S. tariff policies has weakened market expectations. Lastly, the July FOMC meeting of the Federal Reserve was hawkish.

"These factors combined have led to a decline in market risk appetite and reduced trading enthusiasm," said Wang Ying. In the short term, after the hype around concepts like "anti-involution" fades, the A-shares lack further upward momentum and are expected to mainly fluctuate.

Wang Dongying, a financial engineering analyst at Everbright Futures, stated that recently, the major indices of the A-share market are near the highs seen since October last year, and the increased trading volume suggests that there are differing opinions on the future trends of the A-share market. In his view, the core disagreement lies in whether a liquidity-driven market can sustain the upward movement of the indices during a period when the profitability of listed companies is declining. From the perspective of the debt cycle, as of the first quarter of this year, the year-on-year growth rate of revenue for listed companies is still negative, which means that the returns on the asset side of enterprises have not covered the costs on the liability side, thereby putting pressure on the sustained upward movement of the indices.

"In the context of the significant previous gains in major A-share indices, a phase of correction is in line with expectations," Wang Dongying believes. The liquidity in the stock market and the underlying policy logic have not undergone substantial changes. Considering the supportive effect of allocation funds on A-shares, it is expected that the major indices will not undergo a systemic correction, and short-term fluctuations will prevail."

Most commodity futures are drifting lower as the market downplays policy expectations.

Yesterday, the domestic commodity futures market also experienced a general decline. Cheng Xiaoyong, deputy general manager of the Guangzhou Financial Holdings Futures Research Center, believes that the main reason is the closing of long positions from earlier profits, leading to reduced positions in black building materials, industrial silicon, and lithium carbonate.

The fundamentals of commodities also show temporary bearish factors. Cheng Xiaoyong believes that, firstly, the recent surge in black building materials and new energy materials-related futures is driven by "anti-involution" policies, but the recovery in demand is insufficient, so after a rebound, profit-taking is likely to occur. Secondly, the policy emphasis on "anti-involution" has weakened, the market's expectations for the real estate market in the second half of the year are low, and additional fiscal policies remain unclear. Thirdly, both the manufacturing PMI and construction PMI fell in July, causing renewed concerns about demand in the market. Lastly, the Federal Reserve's July meeting maintained its stance on not cutting interest rates, leading to a rebound in the dollar, which exerted pressure on commodities with strong financial attributes, such as precious metals.

"U.S. ADP, second quarter real GDP, core PCE, and other economic data exceeded market expectations. Although Federal Reserve Chairman Powell faced pressure from the White House, his statement was hawkish, leading to increased market expectations for the Federal Reserve to maintain higher interest rates," added Zhou Ji, macro foreign exchange innovation analyst at Nanhua Futures.

"This round of adjustments may be short-term. In the context of 'anti-involution' and the possibility of policy intensification in the second half of the year, the strength of policy to counter deflation will not weaken. Supply reduction and demand improvement remain the main themes, and excessive pessimism is not advisable," said Cheng Xiaoyong. Due to the recent increase in market volatility, both long and short positions face significant volatility risks. Traders should pay attention to position control and appropriately reduce their positions. For industrial enterprises, the focus should be on hedging risks rather than turning hedging into speculation, with an emphasis on profits derived from changes in the spot market or basis returns.

Zhou Ji believes that the focus of domestic policy is shifting towards long-term stability, and the probability of strong short-term stimulus is relatively low. The market's expectation of "strong policy support" may be further adjusted.