Three Scenarios for How U.S. Markets View “Uncertainty” as Trump’s Reciprocal Tariff Deadline Nears

TradingKey - With just two days remaining before the July 9 deadline set by U.S. President Donald Trump to end reciprocal tariff suspensions, uncertainty remains over the tariff levels, effective dates, and whether the deadline will be extended. Yet so far, U.S. markets have not shown signs of panic selling.

Last week, Trump said he had signed tariff letters covering 12 countries and sent out notifications on July 7. He previously indicated that unilateral tariffs could range from 10% to as high as 70%, and would take effect on August 1.

To date, the U.S. has only reached three trade agreements. Treasury Secretary Scott Bessent stated that he does not support moving the deadline to August 1, calling it simply the implementation date.

Whether looking at the S&P 500 hitting record highs three times last week, or the fact that the market’s volatility expectations have dropped nearly 50% from April peaks, risk asset investors appear largely unfazed by the upcoming announcement of new tariff rates.

Some investors argue this calm may reflect confidence in the flexibility of the deadline — suggesting that the worst-case scenario is no longer a primary concern.

In other words, this appears to be another round of the so-called “TACO” trade — short for Trump Always Chickens Out — in which investors bet that Trump may once again delay the deadline or announce less aggressive tariff policies than initially threatened.

According to The Wall Street Journal, while uncertainty is generally disliked by traders, this time around, there are three possible scenarios where investors might still find room for optimism.

First, the uncertainty came back down. 

Markets may believe they’ve already figured out the pattern behind Trump's tariff strategy. Much of the recent stock rally can be attributed to earlier tariff delays that followed significant market selloffs, suggesting that Trump may act similarly under pressure.

Second, the uncertainty may mainly hurt the U.S. dollar rather than stocks.

During periods of sharp rises and falls in U.S. equities, a weaker dollar has become a relatively predictable trend. The U.S. Dollar Index recorded its worst start since Nixon devaluation of 1973 in the first half of 2025.

Third, the impact of uncertainty may come — but with a delay.

Tariff-related uncertainty could affect corporate decision-making and dampen investment activity. However, Bank of America analysts noted that such effects typically take time to materialize.

So far, there’s no clear evidence of a decline in capital expenditures — with AI data center investments possibly masking any slowdown — nor has there been a noticeable inflationary impact from tariffs, despite a mild rebound in inflation figures recently.

Nevertheless, The Wall Street Journal cautioned that given U.S. stocks have returned to all-time highs and valuations are stretched, uncertainty won’t always be a net positive.