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On Wednesday, July 9, 2025, President Donald Trump sent out another round of letters to U.S. trading partners, outlining the new tariffs they will face starting August 1. This follows a similar round of letters issued earlier in the week.

Rather than negotiating mutual agreements to lower trade barriers and foster more open trade — as one might traditionally expect from trade diplomacy — the administration appears to be taking a unilateral approach. The President is essentially informing other countries of what tariffs they will be subject to, labeling these moves as “deals,” even though they are more accurately described as imposed terms.

Surprisingly, the stock market reacted positively to the announcement, closing up by about 1% on the day. This upbeat response may seem counterintuitive, given the lack of substantial trade agreements. But the key reason appears to be relief that the United States has reached a kind of truce with China, agreeing on a 50% tariff — slightly higher on some products — which markets see as manageable. Investors seem to have accepted that importers will absorb higher costs, margins will decline in the near term, and companies will adapt over time.

Let’s go over the details of this latest announcement and what it could mean for stock market investors.

A New Round of Letters — Without New Deals

President Trump’s latest letters to trading partners didn’t include any breakthroughs in negotiations, but instead reiterated threats of new tariffs, ranging from 20% to 30%, on a group of smaller U.S. trade partners, including the Philippines and Moldova, effective August 1.

The Philippines was the most notable target this round, though it ranks only 30th among U.S. trading partners by value. These tariffs largely follow the pattern set in April, when a broad slate of new tariffs sent shockwaves through the markets, triggering a selloff and slowing economic activity. The administration temporarily paused implementation of those April tariffs in response to the economic fallout.

Since then, markets have not only recovered but have rallied to higher levels, even though the higher tariffs remain in place. The key positive development during this period has been the perceived stabilization in U.S.-China trade relations, which removed the biggest source of uncertainty.

Markets Adjust to a New Normal

The April tariff hike initially escalated tensions with China, with both sides retaliating. At one point, the U.S. imposed tariffs of more than 100% on some Chinese imports — a level so restrictive that it effectively priced many products out of the U.S. market.

That created major concerns for companies with large import exposure to China — including Amazon, Walmart, Apple, and Costco — many of which already operate on thin margins. A 100% tariff risked obliterating profitability, forcing sharp consumer price hikes.

Over the past few months, however, the U.S. and China reached a compromise: tariffs around 50%, which while still painful, are more manageable. Large retailers and manufacturers have indicated they will raise prices in the second half of the year to pass along some of these costs, though they have been careful not to criticize the administration too harshly to avoid further retaliation.

How Businesses Are Responding

What have companies said about their strategies? From the 200–300 companies I follow closely, none have announced significant plans to shift manufacturing back to the U.S. in response to the tariffs — underscoring the lack of domestic capacity to quickly absorb that kind of production.

For example:

• Apple has indicated it will move more iPhone production to India to mitigate exposure to China and avoid higher tariffs.

• Amazon said it would diversify sourcing globally, shifting production outside China where possible and serving U.S. and non-U.S. markets separately to optimize for lower tariffs.

• Walmart acknowledged it may source a slightly higher share of products from the U.S., but the increase will be modest. Its main strategy will be negotiating better terms with suppliers and relying on its supply chain efficiency to keep price hikes smaller than competitors — effectively gaining market share.

Across the board, the response has been incremental rather than transformative: companies are adapting on the margins, raising prices, and working with suppliers to contain costs — not reshoring manufacturing en masse.

How Tariffs Are Evolving

The July tariffs largely maintain the trajectory set in April. Notably, tariffs on South Korea and Japan remain at 25%, consistent with earlier announcements. While the implementation of some tariffs has been delayed, there is little indication that pre-April levels will be restored.

Some smaller trading partners, like Vietnam, have negotiated minor concessions — similar deals could emerge with others — but the overall direction suggests higher tariffs are here to stay.

For businesses, this means higher input costs, tighter margins, and consumer price increases in the back half of 2025 and into 2026. I also expect to see some shift in consumer spending behavior, with demand shifting away from goods toward services as prices rise on imported products.

Limited Domestic Manufacturing Response

Even if companies wanted to ramp up U.S.-based production, the capacity simply isn’t there. Taking Apple as an example: even if the company were willing to pay more, it would take months or even years to build sufficient manufacturing infrastructure in the U.S., and costs would remain higher.

This reality applies broadly across industries. Higher tariffs may nudge incremental domestic production, but they’re unlikely to result in large-scale reshoring anytime soon.

Tax Cuts Offer Partial Relief

One mitigating factor for businesses is the Trump administration’s corporate tax cuts, which offset some of the pain of higher tariffs. By lowering tax rates and increasing certainty around tax obligations, these cuts help companies absorb higher costs while maintaining after-tax profitability to some degree.

What This Means for Investors

From what I’ve observed so far, U.S. businesses are not fundamentally altering their global supply chains but rather making tactical adjustments to minimize damage. For investors, this suggests that the impact of tariffs, while meaningful, will not be catastrophic for most large, diversified companies.

However, the environment does favor companies with strong supply chain management, pricing power, and the ability to adapt — with Walmart being a clear example of a company likely to outperform under these conditions.

At the same time, consumers will likely see higher prices for goods in the coming months, which could weigh on sentiment and discretionary spending.

Key Takeaways

• President Trump has continued his unilateral tariff strategy, imposing new rates on a range of trading partners without negotiating reciprocal agreements.

• Stock markets have reacted positively, largely due to reduced uncertainty with China and confidence that companies will adapt.

• Businesses are raising prices, diversifying sourcing, and leveraging supply chain advantages, but there’s little evidence of significant reshoring to the U.S.

• Higher costs and squeezed margins are expected, but tax cuts and operational adjustments will help mitigate the impact.

• Investors should watch for companies with superior supply chain strategies and pricing power to outperform as these trends play out.

These are my early observations based on company guidance and macroeconomic signals. As always, I’ll continue to monitor the situation closely and share updates as more information comes to light about how U.S. businesses are adapting — and what it means for your investments.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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