Market watchers may want to keep their summer plans loose.
The action in Washington this past week did little to clarify the endgame for President Trump and Republicans on an array of issues important to investors, but it solidified this summer as the time when at least some finality may have to be reached.
A 90-day pause on some reciprocal tariffs (expiring July 9), advances in Congress on tax cut plans (with new commitments to pass it by August), and the debt ceiling (potentially breached this summer) are all now firmly pointed toward the sunny season, when these key elements of Trump’s economic agenda could come to a head.
The summer-centric focus was further underlined this weekend when a new rule was published late Friday evening that exempted smartphones, computers, semiconductors and other electronics from most of the president’s “reciprocal” tariffs.
But Commerce Secretary Howard Lutnick said Sunday in a television appearance that was a temporary exemption and those products will be part of semiconductor sectoral tariffs coming in “probably a month or two” — ie in May or June.
The wild tariff-fueled swings in the market in recent weeks suggest investors will be watching closely each step of the way.
Trump has, of course, moved many deadlines before and could have flexibility to do the same in coming months on some issues, but others absolutely have to be addressed before the fall, with the economic toll of tariffs already mounting and that debt ceiling deadline coming one way or another.
Here are some of the latest developments and how things are shaping up on these three fronts.
Tariffs: A 90-day sprint until July 9
Tariffs have been front of mind for markets. Trump’s move this week to authorize a 90-day pause on his additional reciprocal tariff plans — except for increasing them on China and keeping 10% duties on the world in place — sets up early July as the new key date to watch.
More precisely, as Trump’s executive order read, the new deadline is “12:01 a.m. eastern daylight time on July 9, 2025.”
That has set up a sprint for the weeks ahead as a team of negotiators led by Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick try to hammer out perhaps dozens of deals.
Trump offered a healthy dose of bravado this week when he claimed he could “make every deal in one day if I wanted to,” while also claiming he would include an array of issues in any final package.
But many have pointed out again and again that even relatively simple trade deals can take years, not weeks, to complete and even Bessent described the team as “overwhelmed” by the number of countries reaching out.
“With partners like Vietnam and Japan, I think that [a deal] is relatively likely over the next 90 days,” said Signum Global Advisors partner and senior analyst Rob Casey this week on Yahoo Finance, “but with the EU and others there are intractable disagreements.”
And the intense focus on China could make things unpredictable.
“I would say China definitely is very isolated at this point,” David Woo Unbound CEO David Woo noted this past week, adding that one question is about China’s response beyond the 125% tariffs they have announced.
Woo said he is watching Chinese President Xi Jinping to see if “he really steps it up and tries to punch back in some other way that’s not economic.”
But Trump has continued to project confidence on that front, posting Friday morning that the tariff policy is “moving along quickly.”
On taxes: The hard part looming for ‘one big beautiful bill’
Taxes are another issue Trump and his Republican colleagues are even more clearly aiming to finish by this summer — in part to provide a boost to markets to offset the tariff pain.
The news this week was that the complex reconciliation process — a congressional procedure required to pass a bill without Democratic votes — took a key step forward after the House voted 216-214 to pass a budget resolution mirroring a recently passed Senate version.
“We’re well on our way,” Trump promised this week, saying the effort was in good shape and adding of the coming bill, “It’s a beauty.”
But this week’s narrow win came after no shortage of arm twisting with many wary Republicans finally assenting after being given assurances that sizable budget cuts will be included in a final bill.
The next step in the process for House Speaker Mike Johnson, Senate Majority Leader John Thune, and Trump is to hammer out the details, with various Republicans offering deeply conflicting positions that will be a challenge to overcome.
On various issues — from trims to Medicaid to help pay for things to state and local tax (SALT) deductions to whether to limit cuts for billionaires to the use of a budgeting maneuver called the “current policy baseline” — different Republicans have at times offered polar opposite positions and promised that they would vote no if their side doesn’t prevail.
Speaker Johnson of course can only lose a handful of his colleagues and narrowly passed this week’s bill to set up a framework after losing two Republicans in the process.
Either way, it’s going to be a politically fraught fight, with Terry Haines of Pangaea Policy noting this week that the push for true spending cuts is a key challenge but with Trump able to “drop the political hammer” if needed.
“These are the by and large not braveheart types who want to take an axe to everything,” he noted of many Republican lawmakers, suggesting an eventual acceptance of a giant bill could be in the offing that could include large amounts of new red ink.
The debt ceiling: A potentially market-rattling deadline
Trump is further set to gamble this summer by forcing the volatile debt ceiling issue to be packaged in the larger reconciliation package.
A March analysis from the Bipartisan Policy Center suggests that the so-called X Date, which is when the US will literally be unable to pay its bills, could fall between mid-July and early October.
The hope for markets is that the issue is averted long before that, but inclusion of the issue alongside tax cuts could push things to the wire.
Of the overall package, Raymond James managing director Ed Mills wrote this week that “final passage is targeted for early summer, with the need to lift the debt limit (included in the bill) as a forcing mechanism for passage.”
Secretary Bessent is helping to lead talks there and promised Trump this week to have the debt ceiling issues “done and dusted” for two years.
But that’s a heavy ask for those budget-conscious Republican lawmakers, many of whom have never voted for a debt ceiling increase and wear that as a badge of honor.
The rules of reconciliation also make it even more difficult.
A bill that fulfills Bessent’s promise could require raising the limit by $4 trillion to $5 trillion — an eye-popping number that would be the largest dollar-specified debt ceiling increase after a previous raise by $2.5 trillion in 2021.
Passing the bill outside of reconciliation could provide more political cover by allowing a so-called suspension and raising the limit until a future date is reached, but the rules of reconciliation require a dollar limit to be attached.
It’s all part of a complex landscape with perhaps only one certainty, as Harvard’s Jason Furman put in on a live Yahoo Finance appearance this week.
“We’re going to get surprised over and over and over again in the next 90 days,” he said, in a comment about tariffs but a point that could be applied to Trump’s entire market-moving agenda.
“What I don’t know is if those are going to be happy surprises or sad surprises.”
By Ben Werschkul · Washington Correspondent | Yahoo Finance
