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 Trump's conflicts with Musk and Powell do not influence the stock market. This does.

U.S. Secretary of State Marco Rubio (R) meets with Japanese Foreign Minister Iwaya Takeshi. (Kayla Bartkowski/Getty Images)

Disregard the most recent season of Love Island USA; Donald Trump’s second term in office increasingly resembles an unending reality show focused on his contentious relationships with Tesla CEO Elon Musk and Federal Reserve Chair Jerome Powell.

Investors must not allow this to divert their attention from the main narrative affecting the markets—the consequences of trade agreements.

Although Trump's criticisms of Musk and Powell create an engaging narrative, it is improbable that either conflict will significantly impact the stock market. Tesla's stock dropped over 5% on Tuesday, yet this decline hardly affected the overall market. Furthermore, Powell still appears resistant to succumbing to the pressure for a rapid reduction in interest rates, despite the president's intense criticisms.

The trade tensions between the U.S. and Japan are significantly more important for Wall Street. On Tuesday, Trump indicated that he is unlikely to finalize a deal with Tokyo and has threatened tariffs ranging from 30% to 35%. The outcome of this situation in the coming days could influence negotiations with other major U.S. trading partners, including Canada and the European Union.

The critical date for the markets is now only a week away, as the 90-day suspension on reciprocal tariffs is set to expire on July 9. If more agreements are not reached before this deadline, it is likely to raise concerns that extensive tariffs will begin to affect the U.S. economy.

Although Trump’s chaotic public disagreements with Musk and Powell may provide some entertainment, the developments in trade should be the primary focus for the markets.

President Says No Trade Deal With Japan as Deadline Nears

President Donald Trump stated that he does not intend to extend the July 9 deadline for trade agreements and warned of potential tariffs reaching 35% on Japan, indicating to reporters that a deal with the world's fourth largest economy seems improbable. Nevertheless, he mentioned that the U.S. might be able to finalize an agreement with India.

"I will be sending letters to numerous countries, and I believe you are just beginning to grasp the process," Trump remarked. "We have engaged with Japan, but I am uncertain if we will reach an agreement. I have doubts about Japan. They are quite formidable."

Trump further noted that he plans to request Japan to pay tariffs of "30%, 35%, or whatever figure we decide upon." This would exceed the initial 24% set for Japan when the reciprocal tariffs were announced on April 2.

The Trump administration had suspended most of those tariffs, anticipating that trade delegations would travel to Washington to negotiate their own agreements instead of accepting the administration's tariffs, which were primarily established within a range of 20% to 49%.

The Trump administration has suspended most of those tariffs, anticipating that trade delegations would travel to Washington to negotiate their own agreements instead of accepting the administration’s tariffs, which were primarily set between 20% and 49%.

Japan’s Prime Minister Shigeru Ishiba stated on Wednesday that he is committed to safeguarding the nation’s interests. "Japan is distinct from other nations as we are the largest investor in the United States, generating jobs," he remarked during a public debate, as reported by Reuters.

What’s Next: With the deadline on July 9 approaching in just a week, investors should prepare for a surge of developments in the upcoming days. Washington’s interactions with India and Japan may offer insights into the overall global trade environment for the remainder of Trump’s presidency.

Fed’s Powell Eyeing June Jobs Report For Next Move

Economists anticipate that the jobs report for June will indicate a slowdown in payroll growth and a slight increase in the unemployment rate. A robust report might provide Federal Reserve policymakers with justification to maintain current interest rates, whereas a disappointing outcome could intensify demands for earlier rate cuts than previously anticipated.

The average number of new jobs created has been 135,000 per month, a decrease from the 186,000 monthly average during President Joe Biden's administration. An unforeseen drop in job creation or a rise in unemployment could prompt Federal Reserve policymakers to consider rate cuts at their meeting on July 29-30.

Federal Reserve Chair Jerome Powell has cautioned that the Fed's capacity to reduce rates is being hindered by President Donald Trump's trade policies, pointing to the significant tariffs that have led to a notable increase in inflation forecasts. He mentioned that the decision regarding rates in July would be contingent on the forthcoming data.

Trump has consistently urged Powell to lower interest rates, arguing that it would reduce the interest burden on the U.S. debt. Two officials from the Fed have suggested they might be in favor of rate reductions as early as this month due to the economic conditions.