Dan Coatsworth, investment analyst at AJ Bell, has provided his thoughts on the end of the 90-day tariff pause.
“There is the potential for a market wobble if we don’t get substantial progress with trade talks over the next few days. Only a handful of countries have struck framework deals so far, suggesting there isn’t enough time for everyone to reach an agreement before the 9 July deadline.
“Investors might want to sit tight and ride out any volatility as history suggests markets bounce back from selloffs.”
| Examples of how markets bounced back from major selloffs | ||||
| Event | Date range | FTSE All World peak to trough decline | How long did it take for the market to fully recover? | How much higher now versus start of selloff? |
| China crisis | Aug 2015 – Aug 2016 | 16% | 373 days | 118% |
| Covid crash | Feb 2020 – Aug 2020 | 34% | 190 days | 58% |
| Rapid rise in inflation and interest rates | Jan 2022 – Feb 2024 | 27% | 780 days | 21% |
| Liberation Day | Apr 2025 – May 2025 | 11% | 30 days | 10% |
| Source: AJ Bell, LSEG. 1 July 2025. FTSE All World price in dollars. | ||||
“Markets can overreact as investors try to second-guess what’s going to happen and many people often take the extreme view – fearing the worst. Following a knee-jerk reaction, we often see more rational thinking and that can help markets to rebound following a correction.
“The Liberation Day speech on tariffs in April triggered an 11% slump in the FTSE All-World index, a benchmark for the global stock market. Someone who panicked at the sharp decline in share prices and sold investments would have missed out on a rapid recovery. It only took 30 days for the market to fully recover and it is now trading 10% higher than pre-Liberation Day.
“This was one of the quickest bounce backs from major market selloffs over the past decade. For example, it took 190 days for the FTSE All-World to recover from the Covid crash in 2022 and a year to claw back from the 2015-2016 China crisis where investors feared problems in China’s financial system.”
What triggered the market recovery from the Liberation Day selloff?
“The 90-day pause on the Liberation Day tariff plan originally brought some calm to markets after a chaotic period which saw equities plummet and US government bond yields soar.
“Shifting tariffs to a 10% baseline effectively kicked uncertainty down the road and allowed investors to temporarily stop worrying about any potential hit to economic activity and corporate profits.
“The imminent end of the 90-day pause means uncertainty could strike back with a vengeance if the market doesn’t know the lay of the land for trade-related costs between the US and foreign trade partners.
“We’ve already seen widespread downgrades to GDP forecasts in many parts of the world, and on a global basis, linked to trade uncertainty. Companies have put investment on hold until they get clarity on tariffs and both businesses and consumers are showing signs of being more cautious, factors that have combined to feed through to lower earnings expectations. For example, earnings forecasts for the S&P 500 index have been slashed by 5.9% since Liberation Day.”
What’s happened with trade negotiations so far?
“The Liberation Day announcement produced a menu of tariffs and that’s effectively set the bar for the worst-case scenario. Any trade deals that lower the Liberation Day tariff rate could be deemed a win by investors, at least in the near-term. Longer-term, it’s likely that trade officials from affected countries would push to bring rates down as low as they can.
“Trade deals have so far been agreed with the UK, China and Vietnam. There has generally been a positive market response to these deals, even though they are either limited in scope and/or weighted more in favour of the US.”
| Key points on trade agreements since Liberation Day | ||
| COUNTRY | IMPORTS TO US | IMPORTS FROM US |
| UK | 10% tariff on cars (first 100,000 units, 27.5% thereafter)0% on aircraft engines and parts | 0% on beef (13,000 tonne quota)0% on ethanol (up to 1.4bn litres) |
| Vietnam | 20% tariffs, down from 46% in Liberation Day speech.40% tariff on ‘trans-shipping’ goods that originate from a different country and pass through Vietnam | No tariffs |
| Source: AJ Bell, official announcements | ||
“The UK and Vietnam have the most comprehensive deals – the former now has clarity on key industries while the latter has a new headline tariff.
“China is more complicated as there is limited information beyond an agreement that speeds up rare-earth shipments into America, and the US lifting export restrictions on certain chip-design software to China. Any agreement between the two countries represents progress given their fragile relationship.
“Don’t bank on them becoming close friends as Trump has already angered China with a backdoor tariff, whereby trans-shipped goods (many of which originate from China) that pass through Vietnam to the US will have a 40% tariff versus 20% for goods made in Vietnam.”
Which countries are in still in talks?
“Trump has indicated that trade talks are progressing with India, whereas Canada has had a rockier experience. Last week Trump said trade talks with Canada were terminated immediately as he grew angry about a tax policy targeting big tech companies. Canada then did a U-turn and trade talks restarted, with an aim to conclude a deal by 21 July – representing the first official extension to the 9 July ’90-day pause’ deadline.
“Japan has also experienced problems with trade negotiations and appears to be standing its ground and not letting the US president bully the country into what he wants. Trump took to social media to moan about Japan’s reluctance to import US-grown rice and said Japan would get ‘a letter’. That refers to previous comments about certain countries being informed in writing about higher tariff rates coming into force.
“Investors are keenly awaiting an update on negotiations with the EU. Officials are in talks but a grouchy relationship between the two sides means it’s hard to say if a deal will happen before the 9 July deadline or whether an extension is more plausible. This could be a messy situation given how EU members are not united in their thinking. For example, Germany wants a quick deal while France wants the EU to push hard and get a better agreement.
“Ultimately, trade deals take months or years to flesh out, and are certainly not wrapped up in 90 days. Even so-called ‘done’ deals such as that with the UK are only framework agreements.”
What could happen next?
“The US president likes to push things to the edge and play the game of ‘who blinks first’. He might be hoping that foreign trade officials buckle under pressure of the imminent deadline and agree to trade terms that are heavily weighted in America’s favour to avoid the worst-case scenario of tariffs reverting back to the Liberation Day plan.
“There is a likelihood of extensions to tariff negotiations for countries that have a good relationship with US. Confirmation of extensions could trigger a rally in financial markets as it would remove another near-term risk, or effectively make it a worry for another day.
“Ninety days is not a long time to conduct talks with a large number of countries and the Trump administration might come out and say negotiations have so far been constructive and need a bit longer to conclude. That fact we’ve already seen an extension with Canada shows Trump is willing to bend the rules if a positive resolution is in sight.
“However, if high tariffs are reinstated at the end of the negotiation period for numerous countries, there is a good chance that markets pull back as investors price in weaker earnings for companies affected by the new trade landscape.”
