Who Will Ultimately Pay for the Tariffs? StoneX's Deluard Has an Idea

Key takeaways

• US attack on Iran may be a signal that the 'TACO' tariff policy may be over
• StoneX's Deluard says corporate profits could take a hit
• 10% baseline duties have boosted US revenue by nearly $20 billion since April

Vincent Deluard, Director of Global Macro Strategy for StoneX, was quoted by John Authers in Bloomberg's Opinion Newsletter with regards to what he thinks is really behind President Donald Trump's seeming inability to decide on implementing his trade policy and at what level.

President Donald Trump's Liberation Day tariffs were announced on April 2, only to be put on a 90-day pause one week later. The tariff pause is set to end July 8, with over 90 separate trade negotiations underway and no agreements yet reached, aside from a deal with the UK.

The pause on the reciprocal tariffs and tepid evidence of pass through to underlying inflation, along with the US-Israel military attack on Iran, have taken the spotlight off tariffs. Meanwhile, according to Bloomberg, the 10% baseline duties that took effect in April have boosted US revenue by nearly $20 billion since then.

From Authers’ perspective, markets are not prepared for the sudden imposition of the high tariffs announced on April 2. Instead, he argues, the latest theory is that Trump, as the master dealmaker, has been "crazy like a fox" and will simply leave the tariffs at their current levels. Authers said the 10% tariff is the most significant new barrier to global trade since World War II but that people are "getting used to it." If the US settles on ‘only’ a 10% levy, the international markets will treat it "as a victory."

A debate had raged earlier this year over whether Trump's tariffs were intended to generate revenue or if they were being used as a lever to bring manufacturing back to the US.

While some companies accelerated their production to try to beat the levies, manufacturing PMIs for June suggest that global industry is progressing with little difficulty. PMI numbers across the developed world have gone up since Trump's Liberation Day.

The US deficit also plays a role as Trump's One Big Beautiful Bill Act struggles to make it through Congress. The Congressional Budget Office recently estimated an additional $2.4 trillion in debt; however, it also estimated that the total revenue from tariffs enacted on May 12 would reduce the debt by $2.5 trillion during the same period.

Accepting a 10% baseline tariff, Authors said, also means going along with deglobalization, tantamount to a tax on the profits of importing companies. StoneX's Vincent Deluard argues that the administration is "redistributing income to workers" from companies. Trump's 2018 tariffs on China had no impact. Deluard states that this was due to the yuan's depreciation, and as a result, China's exports were rerouted through Mexico, Vietnam, and India.

This time around, he argues that the onus will fall on corporate profits. Deluard said, "The 2025 tariffs will have a different impact because the dollar index has lost 10% this year, and tariffs are universal; therefore, importers cannot switch to non-tariffed suppliers. If foreigners don't pay tariffs, their costs will be passed on to consumers or US corporate profits. The grand bargain of the Big, Beautiful Bill is to offset the inflationary shock of the tariffs with personal income tax cuts. If exchange rate adjustments, foreigners, and consumers do not pay for tariffs, corporate profits will."

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Read the full article here.

Writer: Dan Morales
Expert: Vincent Deluard, Director of Global Macro Strategy

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