Markets have made significant progress since April. The announcement by the White House that Japanese tariffs would only be levied at 15 percent instead of 25 percent sent U.S. markets on a tear. Imagine if they were 10 percent. "The largest deal ever made," according to the president, means that Japan will pay a 15 percent tariff to sell goods to us, while we will pay nothing to sell goods to them. In reality, Americans will pay 15 percent more to buy goods from Japan, and the Japanese will pay nothing to purchase goods from us. Japan exported $141.52 billion to the U.S. last year. President Trump's tariff deal will therefore cost American corporations and consumers an extra $21.22 billion annually. If you believe that Japanese exporters will pay this tax, I have some oceanfront property in Arizona that I want to sell you. The amount consumers are willing to pay versus what corporations pay will depend on the circumstances. Currently, corporations are absorbing most of the additional costs. These tariffs were supposed to protect U.S. automakers, but General Motors just took a $1.1 billion hit to its second-quarter earnings from Trump's tariffs. They expect the tariff impact to worsen in the third quarter and estimate a $4 billion to $5 billion tariff loss for the year. The American Automotive Policy Council, which represents the Big Three automakers (General Motors, Ford, and Stellantis), says the agreement puts their companies at a competitive disadvantage since they face a 50 percent tariff on steel and aluminum and a 25 percent tariff on parts and finished vehicles under the agreements with Canada and Mexico. What sold the deal to Donald Trump was the $550 billion the Japanese have supposedly promised to invest in the U.S. Actually, it is not investment per se, but government loan agreements and guarantees to support investments. That is what Japan is offering, but the investment part of this agreement is just a policy goal, and not a legally enforceable commitment. This will also result in a larger trade deficit in the U.S. balance of payments, in case anyone cares. Trump claims that the U.S. will receive 90 percent of the profits. On Friday, the Japanese disputed this, stating that the profit split will be based on contributions made by both parties. I can see where the president gets his numbers, since it will be Americans borrowing the money and making the investments, they deserve the lion's share of any profits. Japan will provide the loans, acting as a banker on these infrastructure projects, and make its money on the interest charged. That is not a bad deal for Japan. It is similar to China's Belt and Road initiatives. For years, China has provided loans to indebted, emerging market economies to build global infrastructure projects. In this case, the U.S. (also a debt-ridden country) acts as the emerging market. When all is said and done, if we assume that this deal will provide a blueprint for global agreements in the future, a tariff rate of 15 percent, worldwide could be the worse America may have to endure. If so, investors may have avoided the worst. They have, but it would still be a heck of an increase from the 2.4 percent rate we had in January. It will be a massive anti-growth tax bite for the economy. U.S. Treasury Secretary Scott Bessent argues that the pro-growth elements of Trump's tax and deregulatory agenda will offset the damage caused by tariffs. Buried in the One Big Beautiful Bill fine print are several tax offsets to help corporations weather the hits to their profit margins. The 100 percent equipment and factory expensing, for example, helps offset some of the tariff expenses. The same can be said for high-tax bracket individuals, who could see substantial extra tax benefits due to the increase in SALT tax deductions. For married joint filers, the deduction soared from $10,00 to $40,000. This allows high-income earners and business owners to deduct a larger portion of their state and local taxes ( another $30,000) from their federal taxable income. As for the rest of us, prepare for a lower standard of living. Two more tariff deals were also announced: one with the Philippines and the other with Indonesia. Both countries will be saddled with 19 percent tariffs on their total exports to the U.S. of $14.5 billion. That is an additional $2.75 billion that Americans will need to absorb. Second-quarter corporate earnings thus far have been good enough to "beat" Wall Street estimates. Overall, of the 164 companies (33 percent of the S&P 500) reporting so far, 84 percent are beating estimates. Earnings, combined with reasonable economic data, have supported stocks this week as well. Markets continue to grind higher as we await news on a trade deal with the European Union and the Fed's Open Market Committee meeting at the end of next week. President Trump gives the odds of a trade deal with the EU as 50/50, and markets are betting that there will be no interest rate cuts by the Fed in July. Historically, August marks the beginning of a challenging period for markets that lasts into October. Days of record highs have stretched markets to the breaking point, but most traders believe that any pullback in stocks would be 2 to 3 percent at most. That would barely be a blip in the scheme of things.