The tariff situation seems to be amping up a bit – 50% on copper, 200% threatened on pharmaceuticals, semiconductor tariffs to be announced soon...Trump is emboldened as he says many trade deals to be signed today and is liking the tariff income that the US is pulling in just as he has cut income taxes. The key EU deal seems to be taking longer than expected...Trump says he’s two days away from sending them a letter. Germany’s finance minister says the EU will retaliate if they don’t reach agreement – this is the biggest risk of escalation from this point.

And we now have a game of chicken as Trump said that after extending his 9 July deadline to 1 August, there will be no extensions or delays. Stocks on Wall Street briefly hit session lows on this Truth Social post:

“As per letters sent to various countries yesterday, in addition to letters that will be sent today, tomorrow, and for the next short period of time, TARIFFS WILL START BEING PAID ON AUGUST 1, 2025. There has been no change to this date, and there will be no change. In other words, all money will be due and payable starting AUGUST 1, 2025 - No extensions will be granted. Thank you for your attention to this matter!”

But the S&P 500 ended the session flat as investors looked through the worst of the event risk. The Dow ended down 0.37% while the S&P 500 and Nasdaq were essentially flat; though the small cap Russell 2k rose 0.66% and despite all the tariff noise the Vix fell back. US futures are flat this morning while bond yields and the USD are a touch higher, with the dollar picking up some bid on the tariff escalation.

This is the ultimate TACO test – the market still seems to think that Trump will back down. Whether that is true or not, we should consider the likelihood that investors will hold off selling after being burned last time.

Copper prices in New York surged 11% to a record high as Trump slapped a 50% tariff on imports of the metal – up from the 25% expected by the market. No one will want to ship to the US and London prices fell to widen the spread. This will have huge implications for a range of industries, from autos to energy.

The FTSE 100 rose early Wednesday despite miners Glencore and Anglo American taking a hit from the copper tariffs. BP and Shell rose as oil prices ticked up. Elsewhere, the DAX and CAC both notched modest gains after a pretty lacklustre session on Wall Street.

In other news, Britain is due a fiscal reckoning sooner or later. The UK’s public finances are on an unsustainable long-term trajectory, according to the OBR, the body that marks the government’s homework. The OBR warns that debt would rise to 270% of GDP by 2070 – up from 100% today – if current policies were left unchanged.

Wall Street has turned bullish on US stocks - Goldman Sachs have joined the party to raise their year-end S&P 500 target, signalling it will rally 11% above last week’s record high. JPMorgan, Barclays, Citigroup and Deutsche are arleady drinking from the punch bowl.