There are some issues with this deal, as with a few of the other tariff negotiations over the past few months.
The framework agreement is still pending ratification by EU member states and the European Parliament, which could take months and may find opposition and debate. The deal imposes a 15% tariff on most EU exports to the United States, half the originally threatened 30%, but still well beyond historic norms.
In the framework of the deal, the EU commits to energy imports worth $750 billion over the next three years, which includes copious amounts of liquefied natural gas (LNG) and petroleum products. Trump's "America First" agenda apparently favors selling high-priced fuel to Europe rather than keeping costs down for U.S. consumers. Besides, there's nothing written in stone, nor are there penalties for deviating from the outline of the deal. The EU, being an amalgamation of independent countries, might find disagreement among its members, especially if cheaper fuel can be purchased elsewhere.
The MAGA component includes investment in the American heartland of $600 billion, to be mobilized from European industries and invested in the United States, with a focus on defense manufacturing. Trump supposes that Europe will continue fighting its proxy war in Ukraine and will be willing to pay for American weapons, over three years, which is quite a long time for events on the ground to change.
Thus, U.S. markets were not exactly enthralled over the prospects, bearing in mind that the U.S. and Europe have perfected the practice of breaking contracts at their leisure.
In a related development, American appliance manufacturer, Whirlpool (WHR), was trading down as much as 17% in the pre-market after missing EPS estimates badly when it announced second quarter results after the close Monday. Earnings per share for the second quarter came in at $1.34 vs. $1.74 consensus and $2.39 a year ago.
"As expected, the second quarter continued to be impacted by competitors stockpiling Asian imports into the U.S. Despite this, we are well positioned in North America with a robust pipeline of new products, the industry's leading U.S. manufacturing footprint, and favorable housing demand fundamentals,"--Whirlpool CEO Marc Bitzer.
On the forward front, Whirlpool (WHR) expects full-year EPS of $6.00 to $8.00 (AKA $7.00) versus a consensus of $9.06. Whoops! The market surely didn't like that.
The company also made the stunning announcement of recommending a new quarterly dividend rate of $0.90 per share, basically cutting the current $1.75 per share payout rate in half. This is nothing short of complete capitulation from an American-based company. The problem, despite corporate protestation to the contrary, isn't other companies stocking up on foreign inventory, it's the beginning of blowback from tariff threats and imposition in foreign markets. Whirlpool's sales were down materially in Latin American and Asian markets. Potential customers in countries from Thailand to Peru, Chile and Brazil are balking at "buying American." This is a problem the promoters of Trump tariff policy have clearly not adequately anticipated.
Trump's plan to bring foreign manufacturing back to the United States may have a fatal flaw if consumers in markets around the world consider the U.S. to be bullying the rest of the world - taking their jobs, for instance, and making their home-grown products pricier in the U.S. - they're likely to opt for products produced in their own countries or more friendly, neighboring, non-tariffing countries. Beyond that, in the absence of tariffs on goods and services not affected by U.S. tariff policy - say between Vietnam and Australia, or Brazil and Mexico, or, any of hundreds of other combinations - competition will be fierce and buying U.S. products may be considered toxic, unpatriotic, and not in the host nation's best interests.
The U.S. does not have a monopoly on patriotism. Most people in the world support their own countries first. While the bumper-sticker slogan, "America First", may support a degree of patriotism in North America and consumers supporting U.S. businesses, it translates to "Europe First", "Japan First" or even "BRICS First" to the rest of the world.
There are a multitude of issues that could arise from Trump's tariff proposals and their implementation, some of which cannot fully be appreciated until data from a few quarters is evident. While the stock market remains largely gung-ho on future prospects - the Shiller PE hit 38.96 yesterday, the second-highest ever - stocks are getting to a point of ridiculousness in valuation terms. Any deviation from the agenda set by the White House and congress could lead to unexpected results, such as Whirlpool demonstrated as a potential canary in the tariff coal mine.
In the meantime, the S&P and NASDAQ look to continue their streak of all-time highs while the Dow Industrials and Dow Transports flounder around, just below record levels, an indication that America's industrial might may be less-than-almighty. Gold and silver are beginning to rebound after three days of relentless short-selling on the COMEX. They supply an existential backdrop to the world's debt-fueled euphoria, reminding the planet about what really constitutes money and wealth.
The FOMC begins a two-day meeting today which will culminate in a policy announcement at 2:00 pm ET Wednesday. Until then, trading is likely to be wait-and-see mode, with the Fed stuck at a fed funds target rate of 4.25-4.50%, and prospects for Trump getting his rate cut slim. US 2nd quarter GDP will be released prior to the policy statement, so that number will almost surely be in play.
Everything will be fine until it's not. So far, so good, but the future is largely unpredictable.
At the Close, Monday, July 28, 2025:
Dow: 44,837.56, -64.36 (-0.14%)
NASDAQ: 21,178.58, +70.27 (+0.33%)
S&P 500: 6,389.77, +1.13 (+0.02%)
NYSE Composite: 20,821.28, -129.17 (-0.62%)
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