One of the cornerstones of the rally in the S&P 500, the NASDAQ, and the broader market has been the hope that the trade war could be resolved soon. But as time has passed, there has been little real progress.  So far, only the U.K. has signed a framework agreement among the U.S.'s major trading partners. And it wasn't even a full trade deal, as most of the new tariffs and export restrictions the U.S. imposes on the U.K. remain in place.   

As for the rest of the countries, the only progress seems to come solely from the president's tweets, which is apparently why threats of higher tariffs have resurfaced: recently, the Trump administration asked partners to submit their best offers for tariff negotiations by June 4, with proposals in key areas, including tariff and quota offers for U.S. industrial and agricultural products, and plans to address non-tariff barriers.  

It’s worth noting that the temporary tariff suspension expires on July 8. After that date, it is unclear whether the pause will be extended to continue talks, especially given that many say the President always chickens out. Judging by the continued optimism in risk assets, however, investors expect a repeat of the usual script: threats followed by a period of reflection and words that so many have called to reach greater deals.   

But weren't Trump's tariffs overturned?        

In fact, last week, the U.S. Court of International Trade ruled that President Trump had overstepped his authority by imposing several tariffs, especially those directed at China, Mexico, and Canada, under the International Emergency Economic Powers Act of 1977. The court held that the law does not allow tariffs to defend against economic threats and blocked some tariffs, boosting markets' optimism.       

A U.S. appeals court reinstated Trump's tariffs just a day later, however, putting the lower court's ruling on hold while it undergoes further review. Even if the courts do not rule in his favor, the president still has other tools to impose higher tariffs on countries. Not surprisingly, demand for safe-haven assets like gold remains strong, with the XAUUSD rate staying above $3,300, although with some help from rising geopolitical tensions.      

What if negotiations fail?

If negotiations fail and the U.S. follows through with tougher restrictions, other countries could strike back by withdrawing from U.S. assets. According to Bank of America analysts, the dollar is likely to weaken further this summer as a result of Trump's trade policies, a trend that could boost gold. As for bitcoin, it could also experience a rally, but given how speculative it is, betting on it would be risky to say the least.