Happy Memorial Day weekend! What was supposed to be a calm, relaxing, and sleepy few days quickly metastasized into panic, fear, and headaches. The mood shift came after President Donald Trump threatened to impose tariffs on the European Union and tech titan Apple. Wall Street participants must now spend their time at the backyard barbecue thinking about Trump’s next 4D chess move rather than discussing the one big, beautiful bill.
Tariffs on the Big Apple
President Trump started May 23 with a social media post threatening a 25% tariff on Apple iPhones. He is upset that the company is moving a vast chunk of its manufacturing prowess to India for US-bound iPhone shipments.
"I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else," Trump said on Truth Social. "If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S. Thank your [sic] for your attention to this matter!"
Shares of Apple declined as much as 3.5% after the president's social media remarks.
Industry experts have projected that US iPhone production would raise the product's price. Wedbush tech analyst Dan Ives estimates the cost of a made-in-America iPhone would be $3,500, up from the current retail price of about $1,000. Others note that transitioning Apple's supply chain to the United States would not happen overnight but over a years-long process. Whatever the case, the White House ostensibly does not desire even a hint of Apple thinking about tariff arbitrage by relocating manufacturing to India.
It’s Not a Tariff – It’s European!
The president followed up his Apple-related Truth Social post with an announcement regarding the European Union. Because trade negotiations are not progressing, Trump plans to institute “a straight 50%” levy on the 27-member trade bloc beginning June 1. However, he noted that there is no double-digit import duty if companies manufacture their products in the world’s largest economy.
"The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with," Trump said, pointing to the bloc's value-added taxes (VATs), corporate penalties, "monetary manipulations," and the trade deficit. "Our discussions with them are going nowhere!"
According to the US Trade Representative’s Office, the US goods trade deficit with the EU last year was $235.6 billion, up 13% from 2023.
President Trump has regularly accused the EU of being formed to rip off the United States and take advantage of the country in trade. The administration implemented a 20% tariff on the region at the April 2 Liberation Day White House event, but later issued a pause and lowered the levy rate to 10% for 90 days. EU officials also agreed to pause their countermeasures to allow for trade negotiations.
In what was a widely ignored Truth Social post, Trump alluded to the trade deal with the United Kingdom, suggesting that it "is working out well for all." Will the US-UK arrangement be the blueprint for all other trading partners? The upcoming talks between US Trade Representative Jamieson Greer and the EU’s top trade negotiator, Maroš Šefčovič, should serve as a reference point.
Market Reaction
Wall Street was not too pleased to learn that the Memorial Day weekend would be marred by trade policy uncertainty, and US stocks slipped.
The blue-chip Dow Jones Industrial Average dropped more than 300 points. The tech-driven Nasdaq Composite Index plunged as much as 400 points, and the broader S&P 500 lost about 1%. The widely watched US Treasury market was in a sea of red, though yields were able to pare some of their losses. The benchmark ten-year yield declined to around 4.52%, and the 20- and 30-year yields remained above 5%.
The US Dollar Index (DXY), a gauge of the buck against a weighted basket of currencies like the Japanese yen and British pound, fell about 0.5% to 99.45. The index registered a weekly loss of roughly 1.6% and is down more than 8% this year.
Gold prices picked up about $50 to settle in above $3,300 per ounce. Silver remained little changed at $33 an ounce. Bitcoin, which recently hit an all-time high, tumbled by 1%.
Tariff Talk
Market watchers anticipated that the trade situation would be resolved mainly after the Trump administration backed off its aggressive stance and pursued deals that merely rearranged chairs on the boat deck. However, the president's latest move suggests that he either wants to reassert America’s dominance in global trade negotiations or bring down interest rates. Determining the objective might depend on who graces the public with his presence: Trump or Treasury Secretary Scott Bessent.
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