Trump's &#34;Reciprocal Tariff 2.0&#34; threat impacts Asian markets, risk aversion sentiment rises, U.S. stock futures collectively decline, while gold, the U.S. dollar, and Bitcoin see slight increases.
According to CCTV News, on July 12 local time, U.S. President Trump posted a letter to Mexico and the European Union on the social media platform &#34;Truth Social,&#34; announcing that starting August 1, 2025, the U.S. will impose a 30% tariff on products imported from Mexico and the European Union.
This sudden escalation of trade policy has put pressure on the market, with U.S. stock futures opening slightly lower on Monday, and S&amp;P index futures down 0.4%.
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The Nikkei 225 index opened down 0.3%, while the Seoul Composite Index opened nearly flat.
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Market risk aversion sentiment is rising, with gold up 0.5%, marking the fourth consecutive trading day of increases, although the current gains have slightly receded.
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The U.S. dollar and yen have slightly risen against major currencies.
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Following a weekend peak, Bitcoin's gains have receded, with an intraday increase of about 1%.
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Analysts warn that investors should not expect Trump to be merely bluffing. Brian Jacobsen, Chief Economist at Annex Wealth Management, stated that a 30% tariff level is punitive, and its impact on the European Union may exceed the shock to the U.S. itself.
This week, market focus will also shift to China's Q2 GDP, U.S. June CPI, and a series of key economic data, in addition to the upcoming U.S. Q2 earnings season.
<h2>Market Resilience Under Test</h2>
Trump's tariff threats since taking office have made it difficult for financial markets to price accurately.
**Although the &#34;reciprocal tariff&#34; announcement on April 2 previously triggered a sell-off in risk assets and U.S. Treasuries, the declines have largely reversed as Trump repeatedly postponed the effective date. However, this latest tariff escalation against the European Union and Mexico has shattered the recent optimistic sentiment surrounding negotiations
**
Win Thin, Global Market Strategist at Brown Brothers Harriman, questioned:
<blockquote>
“After seeing how Mexico and Canada were treated years after signing the USMCA (United States-Mexico-Canada Agreement), which country would still be willing to strike a trade deal with the U.S.?”
“At some point, the market will react to the erosion of credibility of U.S. policy that we are witnessing.”
</blockquote>
However, Markets Live strategist Garfield Reynolds believes that the stock market is still months away from suffering serious and sustained pain due to tariffs, and may even weather the storm:
<blockquote>
“The lesson from 2018 is that investors are likely to ignore trade conflicts at least until large-scale tariffs actually take effect.”
</blockquote>
<h2>Trump Pressures Powell, Increasing Market Uncertainty</h2>
In addition to trade policy, recent criticisms from Trump and his allies towards Powell have also added variables to the market.
The Trump team’s questioning of the expensive renovation project at the Federal Reserve headquarters has sparked discussions among some officials about pushing Powell out.
Wall Street Journal mentioned that Deutsche Bank analyst George Saravelos believes Powell's potential dismissal is a significant and underestimated risk. He predicts that if Trump forces Powell out, it could trigger a 3% to 4% drop in the trade-weighted dollar within 24 hours, and U.S. Treasury yields could see a sell-off of 30 to 40 basis points

S&P index futures fell 0.4%, gold rose 0.5%, marking the fourth consecutive trading day of gains, the dollar index edged higher, and Bitcoin retreated from its historical high

- On July 12, President Trump announced a 30% tariff on imports from Mexico and the EU starting August 1, 2025, causing market pressure and a decline in U.S. stock futures.  
- This unexpected trade policy shift heightened risk aversion, leading to slight increases in gold, the dollar, and Bitcoin, while analysts warned of the punitive nature of the tariffs.  
- Market focus will shift to key economic data, including China's Q2 GDP and U.S. CPI, as uncertainty grows over Trump's influence on Federal Reserve Chair Powell and potential market reactions.

Trump "worked overtime over the weekend," U.S. stock futures opened slightly lower, gold rose slightly, and Bitcoin increased by 1%