"Tariff Letter" to be issued tonight! Besant: If no agreement is reached, tariffs will "rebound" to "Liberation Day" levels

According to Zhitong Finance APP, in the last few days before the 90-day reciprocal tariff suspension period set by Trump expires on July 9, the U.S. President plans to announce a trade agreement and issue a tariff warning on Monday, while countries continue negotiations throughout the weekend, striving to avoid the highest punitive measures on U.S. exports by the original deadline on Wednesday (July 9). After U.S. officials hinted that trade partners could continue negotiations before the tariffs take effect on August 1, the negotiation timeline seems to have been reset, granting them an additional three weeks for agreement discussions.

U.S. Treasury Secretary Scott Bessent stated last Sunday that if U.S. trade partners do not make progress in trade negotiations, tariffs will take effect on August 1, reverting to April levels. He commented, "President Trump will send letters to some trade partners indicating that if you do not advance negotiations, your tariffs will revert to the levels of April 2 starting August 1."

However, Bessent earlier denied that Trump set August 1 as a new deadline. He said, "The final stages are very busy." "This is not a new deadline. We are indicating that things will happen on that day. If you want to speed things up, then do it. If you want to return to the original rates, that is your choice."

Bessent also said, "We'll see, I won't reveal the overall strategy." When asked if the government would reach several agreements before Wednesday, Bessent responded, "I expect several significant announcements in the coming days."

Bessent indicated that the 18 major trade partners are a priority, and several significant agreements are expected to be announced. He also acknowledged that the numerous ongoing negotiations complicate the final stages.

Additionally, Trump posted on Truth Social last Sunday evening, stating, "I am pleased to announce that the tariff letters and/or agreements from the United States to countries around the world will begin to be sent out at 12 PM Eastern Time on July 7 (Monday)."

He revealed last Sunday that he had signed about a dozen letters to be sent out on Monday, informing countries about the tariff increases. He stated, "I believe that by July 9, most countries will either receive letters or reach agreements, and some agreements have already been made."

Earlier last Friday, Trump also told reporters, "They will start paying tariffs on August 1, and in almost all cases, funds will flow into the United States starting August 1."

U.S. Secretary of Commerce Howard Lutnick also stated that new tariffs on individual countries will take effect on August 1.

EU: Progress Made on Reaching Agreements, Still Working Towards Wednesday Deadline

As Trump's key 90-day suspension period for U.S. reciprocal tariffs approaches, tariff uncertainty and the progress of negotiations among countries are expected to dominate market attention for some time.

The EU stated that it has made progress in reaching agreements and is still working towards the Wednesday deadline. A spokesperson for the EU executive body said in Brussels on Monday that Trump had a call with European Commission President Ursula von der Leyen on Sunday, and the two had a "good exchange."

A spokesperson for German Chancellor Friedrich Merz's government stated in Berlin on Monday that Merz spoke with von der Leyen and the leaders of France and Italy over the weekend to discuss how to resolve trade disputes with the United States The chief spokesperson of Merz, Stefan Cornelius, stated at a routine government press conference in Berlin: "Time is running out." He added that Germany will continue to support the European Commission's strategy in negotiations with the U.S., "This is a matrix that requires comprehensive consideration of many complex factors."

Last week, Trump signed the "Big and Beautiful Act," leading the Nasdaq and S&P 500 to hit historic highs. On this occasion, Trump also used tariff powers as a tool to pursue domestic economic interests and counter geopolitical rivals. His latest threat is to impose a 10% import tax on "any country that aligns with the anti-American policies of the BRICS nations."

As the BRICS countries, including Brazil, Russia, India, China, and South Africa, gathered in Rio de Janeiro for a meeting last Sunday, Trump posted on Truth Social: "This policy has no exceptions."

Officials from economies including the EU and Japan continued negotiations with him throughout the U.S. Independence Day (July 4) holiday weekend.

The Trump administration has claimed for weeks that multiple agreements are imminent, but so far has only announced a limited framework with the UK, a truce with China, and a brief outline of an agreement with Vietnam.

Morgan Stanley: Tariffs Remain a Key Variable for Market Outlook

Although it has been confirmed that significant tariff increases will begin on August 1 instead of July 9, trade agreements and policies will continue to dominate the headlines in the coming weeks, with institutions commenting extensively.

Morgan Stanley's baseline scenario anticipates that tariffs will only be moderately raised, but some new disruptive factors may emerge. The bank's strategist, Michael Zezas, stated: "But it is worth considering what would happen if things do not go as planned. Currently, there is almost no substantive progress reported publicly on trade agreements."

Zezas added that, in short, considering multiple scenarios is a prudent approach. In one scenario, the White House may choose to extend the tariff suspension period for allies under the pretext of achieving "progress" in bilateral negotiations while announcing high-level agreements with some trading partners (including Vietnam) and possibly raising tariff rates for other countries at a later date.

Zezas stated: "In this scenario, we expect that countries like the EU and Japan will ultimately maintain the current 10% baseline tariff rate, although they may issue statements indicating that future rates could increase if certain negotiation conditions are not met."

Another scenario is that the government may decide to selectively and gradually re-impose tariffs. Slow progress in negotiations could also lead to a decision to raise tariffs but delay implementation, leaving room for problem-solving.

Zezas noted: "Looking more optimistically, the government may announce some regional or bilateral frameworks—not a complete trade agreement, but enough to clarify that the direction of actual U.S. tariff rates is towards reduction, thereby reducing uncertainty regarding recent import cost trends."

If tariffs are significantly raised, it could reinforce Morgan Stanley's more pessimistic economic outlook, which predicts that by the fourth quarter of 2025, the year-on-year growth rate of U.S. GDP will be only around 1%