The pause on US tariffs, which was intended to encourage reworked bilateral agreements with major US trading partners, expired on Friday, August 1, 2025. Here's a summary of the situation, and what it may mean for investors.
What has changed?
- As of August 1, the US has announced new tariffs on more than 90 countries, including the major trading partners that recently negotiated US trade deals. These tariff rates are expected to go into effect on August 7.
- Before the August 1 expiration of the tariff pause, the US had announced finalized agreements with the European Union (most tariffs capped at 15%), Japan and South Korea (most at 15%), the United Kingdom (most at 10%), Vietnam (20% with a higher rate on trans-shipped goods), the Philippines (most at 19%), and Indonesia (most at 19%).
- The US plans to impose higher tariffs on trading partners that have not reached an agreement with the US, including a 35% tariff on goods from Canada not covered by the United States-Mexico-Canada Agreement (excluding crude oil and natural gas), a 39% tariff on most goods from Switzerland (excluding pharmaceuticals), a 50% tariff on most goods from Brazil, and a 25% tariff on all goods from India, along with an additional penalty for India’s trade with Russia. The US administration also announced tariffs on certain semifinished copper products, citing national security concerns.
What has not changed?
- Permanent trade agreements with some of the most important US trading partners remain elusive, including the 3 largest—Mexico, China, and Canada—which together compose more than a third of US imports.
- The collective US tariff rate remains near its highest point since the 1930s. Tariffs have increased revenue to US coffers, but it remains to be seen if it comes at the expense of future economic growth and higher inflation.
- As Fidelity capital markets strategists, we have not changed our constructive longer-term outlook on US stocks or the economy based on the tariff-related news cycle.
What could come next?
- Negotiations on a new US-Mexico-Canada Agreement (USMCA) should begin in October. The US administration may demand higher tariff rates on trans-shipped goods from Mexico and Canada. Sticking points between the North American partners appear likely. On July 31, the US paused higher tariffs on Mexico for 90 days to encourage trade negotiations. No such extension for Canada has been implemented to date, amid seemingly stalled talks. However, an optimistic scenario could include the establishment of an improved continental industrial base, leveraging Canada’s natural resources, Mexico’s manufacturing, and US-based technology and productivity enhancements.
- A temporary halt on most new US tariffs on China expires on August 12. A further extension of this tariff truce may still be possible, although this decision appears to rest with the US administration. Trade talks are ongoing, and it may take months before any agreement is reached.
- The US likely will increase tariffs on several countries that buy Russian oil in response to stalled US negotiations to end Russia’s war in Ukraine. In this regard, the US administration imposed a 25% tariff on goods from India on July 30 and a yet-to-be-named penalty for India’s purchases of Russian oil and military equipment.
- As of the end of July, the deadline for Russia to reach a ceasefire in Ukraine before the US imposes new sanctions was around August 9 to 11.
Will the recent tariff deals have staying power?
They may last for years. However, unlike bilateral US trade pacts of the past, the ones negotiated by the current administration could be struck down by US courts. They also could be altered based on the preferences of the current administration. Lastly, there’s no guarantee the recent agreements will be upheld by future administrations.
How have tariffs affected the economy?
Some economic activity may have been pulled forward in anticipation of tighter trade terms in August and beyond.
Second quarter US gross domestic product (GDP) growth came in at 3.0% (up from -0.5% in the first quarter). This level of economic expansion appears fast enough to support earnings growth expectations for the second quarter (roughly 7.7%).
Looking ahead, it will be important to watch for signs of potential tariff pass-through. Consumer Price Index (CPI) data in June matched expectations at the headline and core levels. Yet it reflected higher prices in the apparel, recreation, auto parts, and furnishing categories.
What to watch
Tariffs matter to the stock market because they can impact corporate earnings, consumer behavior, and economic growth.
Therefore, it will be important to watch corporate earnings trends closely at the aggregate and sector levels in the coming weeks and months to verify that earnings continue to match or exceed expectations, and that earnings growth is not slowing on the margin. As of July 31, there has not yet been evidence of broad-based slowing.
It will also be important to monitor consumer spending and inflation for potential pass-through of tariffs to consumers.
Why tariffs could continue to matter
The markets have grown complacent regarding tariffs. Market volatility has diminished meaningfully since the initial announcement of US tariffs in April 2025, as measured by major volatility indexes.
Yet volatility for both stock and bond markets could rise again if the US were to see renewed tariff uncertainty—with China, for instance. Higher tariffs could boost the chances of potential supply-chain disruptions and goods inflation. This may be especially true among small and midsize companies that lack pricing power and supply-chain flexibility.
Conclusion
While much uncertainty remains, some of the worst trade scenarios regarding US tariffs appear less likely now than they did several months ago.
It will be important for investors to watch the economy going forward, including for signs that higher tariffs are contributing to slower growth, higher inflation, or both.
To date, there has appeared to be little evidence of any widespread US economic decline. Therefore, it may make sense to consider a balanced portfolio that includes stock exposure to benefit from continued economic resilience and earnings growth, as well as fixed income positioning that may help prepare for economic uncertainty.
In the past, assets that have helped investors hedge against high and rising inflation have included commodities, commodity-producer stocks, and Treasury Inflation-Protected Securities.