What do Trump's revised tariff rates mean for global markets?

Economic

Summary:

Trump’s delayed tariffs and revised rates sparked mild market volatility. Stocks dipped, currencies of targeted countries weakened, and traders eyed key technical levels amid uncertainty and ongoing trade negotiations.

Trump pushes back tariff timeline with revised rates

President Trump announced overnight a significant shift in his trade policy, postponing the implementation of reciprocal tariffs from 9 July to 1 August. The revised plan includes adjusted tariff rates for 14 countries, with the White House indicating more announcements will follow.

The latest development has created considerable uncertainty across global markets. The timing change suggests the administration is still fine-tuning its approach to international trade relationships.

Strategic tariff approach targets countries and sectors

The latest tariff announcement covers 14 countries with rates ranging from 25% to 40%. Japan's rate increased from 24% to 25%, while Cambodia saw a significant reduction from 49% to 36%.

Notable exclusions from this round include major trading partners such as the European Union, Taiwan, and India, suggesting these economies maybe still under trade negotiations. China, Mexico, and Canada are expected to have separate discussions due to existing trade agreements.

Beyond country-specific measures, the Trump administration is expected to announce sector-specific levies in due course. So far, automobiles, steel and aluminium already face specific tariffs. The probe on other sectors have begun with current investigations covering industries such as semiconductors, pharmaceutical goods, copper, and timber. When combined with country-specific tariffs, the impact on prices of goods and services can be far more severe than current levels suggest.

Figure 1: Reciprocal tariffs assigned

Figure 2: Year-to-May trade deficit by country

Market reaction remains contained despite uncertainty

US equity markets responded negatively to the tariff announcement, with the Dow Jones falling 422 points or 0.9%. The Nasdaq 100 declined by 0.8%, reflecting investor concerns about trade disruptions. Export-focused companies bore the brunt of the selling pressure. Toyota Motor's ADR declined 4% in US trading.

The VIX volatility index spiked to 18.5 before settling at 17.8, indicating heightened market anxiety. Gold prices remained relatively stable despite the uncertainty.

Currency markets showed more dramatic moves, with affected countries' currencies weakening sharply against the US dollar. The South African Rand plunged 1.95%, while the Japanese Yen and Korean Won dropped 1.2% and 1.0% respectively.

However, compared to the market's reaction in April following the Liberation Day announcements, which triggered a sell-off of over 6% and 8% in a day for the S&P 500 and Nikkei 225 indices respectively, the moves we have seen are relatively small. This suggests markets may be becoming more accustomed to flip flops in Trump's policies or welcomed the delayed implementation as this provided three more weeks for countries to negotiate.

Technical analysis reveals key market levels

The US Tech 100 index sits at a crucial technical juncture following yesterday's decline. The pullback has brought the index back to the upper boundary of its ascending channel from mid-May.

Support at 22,500 represents a critical level for the index. Failure to hold above this point could trigger a deeper correction towards 21,500 support.

A decisive rebound from current levels could see the index test the psychological resistance at 23,000. This level would represent a continuation of the recent upward trend.

Figure 3: US Tech 100 index (daily) price chart

The Japan 225 index shows a robust uptrend, trading comfortably above its 200-day simple moving average. The ascending channel's lower boundary from mid-May provides solid support around 38,930, though upside potential remains capped by the recent peak at 40,858. This technical setup suggests the index maintains bullish momentum despite short-term headwinds from tariff concerns.

Figure 4: Japan 225 index (daily) price chart

The USD/JPY pair faces a critical decision point at the 146 resistance level. This level has capped advances on three occasions over the past three months.

A break above 146 would likely propel the pair towards 148 before encountering selling pressure. This move would signal renewed dollar strength against the yen. Conversely, a decline below 142.5 could trigger a test of April's low at 139.9. Such a move would indicate tariff concerns are weighing on dollar sentiment.

Figure 5: USD/JPY (daily) price chart

Source: ig

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Adam

Economic

Recent national and global surveys of business executives have highlighted the U.S. Federal Reserve's dilemma in determining if slowing growth or inflation is the greater risk to the U.S. economy, with interest rate decisions hinging on how policymakers reconcile conflicting information in a still volatile trade environment.

With new economic data pulling the Fed in both directions, surveys of U.S. chief financial officers from the Fed and of global executives from Dun & Bradstreet show business leaders expect the tension to continue as they plan price increases while also anticipating weaker revenue and demand.

That outlook, and the uncertainty around it, could leave the Fed waiting longer than expected before cutting interest rates, a recipe for even more tension with President Donald Trump. Trump last week repeated his call for steep rate cuts and for Fed Chair Jerome Powell to resign, while Treasury Secretary Scott Bessent said the Fed's rate posture was "a little off."

The CFO survey, conducted by the Atlanta and Richmond Federal Reserve banks with Duke University, indicated executives plan to increase prices, even at companies not exposed to rising tariffs, a dynamic many Fed officials fear could mean more persistent inflation is on the way. Policymakers inclined to cut rates sooner argue that tariffs may cause a one-time price shock but not ongoing inflation.

In the Fed's hunt for a reason to cut rates, surveys and tariffs make answers elusive _1

Bar chart showing expected price increases for firms based on their import dependence.

"The concern you'd have in this environment is...the price pressures broaden beyond those that are just directly impacted" by tariffs, Atlanta Fed economist and assistant vice president Brent Meyer told Reuters. "We're seeing some evidence of that, at least an expectation," in CFO survey responses.

Atlanta Fed President Raphael Bostic said recently he worried it could take a year or more for firms to adjust to coming tariffs, with "a pretty significant risk that upward pressure on prices and inflation is going to be with us for some time."

A Dun & Bradstreet survey of 10,000 businesses globally, meanwhile, showed a clear break in sentiment early this year when Trump's tariff plans became clear, with firms scrambling to reorganize supply chains and become less dependent on U.S. markets or production. While that could embed higher cost into supply chains, Dun & Bradstreet Chief Global Economist Arun Singh said the survey overall told a story of slower expected growth.

In the Fed's hunt for a reason to cut rates, surveys and tariffs make answers elusive _2

Line charts showing global business mood.

The quarterly poll has tracked steady declines in overall optimism, worries about the durability of supply chains, and concern that central bank interest rate cuts had "not yet translated into tangible improvements in borrowing conditions for many businesses."

Businesses "do not seem to be in a mood to think well, okay, we'll get some tariffs and that will be that. We'll all move on," Singh said. "The overall economic concern is not going to be short-lived...There's a delay in capital expenditure. They're delaying payment to their vendors...They're trying to de-lever."

Powell at a press conference following the Fed's June meeting said businesses had been "in a bit of shock" following Trump's April 2 announcement of steep global tariffs, but sentiment now "feels much more positive and constructive than it did three months ago."

Nevertheless, he said, firms still must decide how to cope with far higher-than-expected tariffs, with many rates still not finalized. After markets reacted poorly to Trump's April 2 announcement, he postponed many tariffs until July 9 while his administration negotiated with other countries, then moved the deadline back to August 1 while beginning to roll out large, unilateral levies in the absence of finished deals.

Given the high level of uncertainty surrounding White House policy, Fed officials say they are paying particular attention to surveys, interviews with business leaders, and other "soft" data to provide a real-time sense of how decision makers are responding.

The broad sense among corporate officials that they will be raising prices, for example, is a key reason the Fed is reluctant to cut rates and risk adding to any coming inflation with looser credit that could encourage more household and business spending. Its rate has been in the 4.25%-to-4.50% range since December.

Investors expect cuts beginning in September.

But the Fed's 19 policymakers were closely divided in their most recent projections, with 10 seeing several cuts this year and nine effectively pushing easier monetary policy into 2026.

Powell has said repeatedly, and over Trump's calls for big rate cuts, that data and the outlook will determine if cuts are warranted, and so far the case has not been made.

The unemployment rate fell to 4.1% in June and firms added a healthy 147,000 new jobs. Consumer spending may be slowing, but recent inflation was higher than expected.

A recent JPMorgan Chase Institute study showed why the current moment is tough to assess.

Middle-market firms with between $10 million and $1 billion in revenue, accounting for about a third of U.S. employment, face a tariff bill exceeding $82 billion based on levies currently in place. They must determine whether that can be forced back on producers, passed on to consumers, or must be absorbed through lower profits or internal cost-cutting.

In the Fed's hunt for a reason to cut rates, surveys and tariffs make answers elusive _3

Map showing which metro area's firms are facing the largest tariff bills.

"They are large enough to be exposed to tariffs, large enough to be direct importers, but not large enough to have the power to manage margins," as effectively as major national retailers, for example, said institute president Chris Wheat, adding it will take time to determine how much of the extra costs end up paid by producers, passed on to consumers, or absorbed through lower profits and internal cost-cutting.

CFOs in the Fed survey said they had in some cases doubled planned price increases for the coming year. Often those planned price hikes outstripped expected revenue growth, implying that firms also expect slower business, an outcome that could leave the Fed coping with stagflation.

"Our sense is that these tariffs for the U.S. economy will be a stag-flationary shock," said Citi Chief Global Economist Nathan Sheets, pushing the economy "in the direction of having higher inflation, lower growth."

source :reuters

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Thomas

Economic

US Treasury Secretary Scott Bessent is planning to visit Japan next week for the 2025 World Expo in Osaka, according to people familiar with the matter.

The Expo is taking place in Osaka through to mid-October. The US will celebrate its National Day at the Expo on July 19.

The visit would come after US President Donald Trump sent a letter on Monday stating his intention to raise tariffs on all Japanese imports to 25%, effective Aug. 1, slightly higher than the 24% rate initially announced in April.

The trip would also mark Bessent’s first visit to Japan since the trade negotiations started in April. Tokyo’s point man on trade talks, Ryosei Akazawa, has traveled to Washington seven times during that time.

Bessent and Akazawa spoke on the phone for 30 minutes Tuesday following the issuing of Trump’s letter, according to a statement by Japan’s Ministry of Foreign Affairs. The statement said the two officials had a frank, in-depth discussion and agreed to continue vigorous consultations. The statement didn’t mention any upcoming visit to Japan.

A senior US official said the purpose of the trip to Japan is in Bessent’s capacity as head of the American delegation to the Expo. There will be no formal bilateral meetings or discussions of trade, the official said.

Treasury did not immediately respond to a request for comment. Officials from Japan’s Ministry of Foreign Affairs were not immediately available for comment.

Japan was initially seen as a promising partner for a quick deal, but the negotiations hit a roadblock over car tariffs. The sector accounts for more than 80% of the US’s trade deficit with Japan, while it’s a key employer and growth engine for the Japanese economy.

Source: Bloomberg Europe

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Adam

Forex

Given the actions of Donald Trump’s administration recently, it wasn’t a surprise when they announced new tariffs on Japan and South Korea yesterday. The announcement said that a 25% tariff will be placed on Tokyo because talks haven’t made enough progress.

Right now, the USD/JPY currency exchange rate is stable within its usual range. The market will likely watch for signs of progress in the talks and any changes in the decision, as well as how the Bank of Japan will react. The bank’s leaders have often said they need more time to see how the trade war affects Japan’s economy, but if the tariffs remain, the Bank of Japan will have a challenging situation to handle.

Bank of Japan Rate Decision Nears

The Bank of Japan has been following a cautious approach this year. At its last meeting, it decided not to change interest rates, citing uncertainty about how potential tariffs might affect the Japanese economy. But this wait-and-see approach cannot continue forever, especially since inflation has stayed above the target for a long time. One clear sign of this is the sharp rise in rice prices, a key part of the Japanese diet.

If the 25% tariffs remain in place, it would be bad news for BOJ Governor Ueda and his team. On one hand, tariffs could push inflation even higher, making a stronger case for more interest rate hikes. On the other hand, these tariffs—especially on cars—could hurt Japan’s economic growth, and higher interest rates would make things worse.

This puts the BOJ in a tough spot where it will soon have to make some difficult decisions if the US sticks to its plan.

Fed Awaits More Data

The US Federal Reserve is also in a wait-and-see mode, holding off on more interest rate cuts for now. Like the Bank of Japan, it is being cautious due to uncertainty around the impact of tariffs.

As of now, the next likely interest rate cut in the US is expected in September, with a 57% chance of a 25-basis-point reduction. The next key data release—focused on inflation—will come next week. Although recent inflation readings have been lower than expected, they are still above the Fed’s target.

USD/JPY Nears Range High—Breakout or Reversal Ahead?

Since early July, the US dollar has shown some short-term weakness. However, this has not changed the broader trend in the USD/JPY pair, which remains in a consolidation phase. If the dollar continues to weaken, the next target for buyers would be around 148 yen per dollar, near the upper end of the current range.

USD/JPY Eyes Fresh Highs Amid Growing Tariff Pressure, Diverging CB Policies_1

In the short term, traders watching for a possible upward move should keep an eye on support levels around 145 and 144 yen per dollar. If the price falls below the key support at 142 yen, that would suggest this upward scenario is no longer likely.

source :investing

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Warren Takunda

Cryptocurrency

Key takeaways:

Ethereum mega whales have increased their holdings by 9.31%, a stronger buildup than before the 2022 rally.

ETH is consolidating inside a bull pennant, with a breakout potentially targeting $3,400 by August.

Ethereum wallets holding at least 10,000 Ether ETH $2,561 are ramping up accumulation faster than before the 95% rally in mid-2022.

Ether whales reclaim the most supply since 2020

The total ETH held by these “mega whales” recovered to over 41.06 million ETH as of July 7 from 37.56 million ETH—a record low—in October 2024, according to Glassnode data. Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_1

Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_1

Ethereum mega-whale net position change vs. supply. Source: Glassnode

That marks a 9.31% increase, almost double the accumulation pace seen between May and September 2022, before ETH price rallied from ~$1,000 to over $1,950, a 95% increase.

A similar trend played out between November 2020 and January 2021, when whale holdings rose 4%, and ETH jumped from $460 to $1,220. Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_2

Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_2

Ethereum mega-whale supply. Source: Glassnode

Large holders began accumulating well before the broader market caught on in both instances. ETH price action has remained relatively flat in recent weeks, suggesting that the current accumulation phase is still flying under the radar.

This silent buildup could be a precursor to a significant upside move that may not be priced in yet, if the past patterns play out again.

The ongoing rise in mega whales’ Ether holdings further coincides with increasing flows into Ethereum-focused investment funds, including ETFs. The supply recovery is also the strongest and most sustained since the metric’s long-term downtrend began in June 2020.

Bull pennant targets 30% ETH price gains

Ether is also trading within a textbook bull pennant pattern on the daily chart. The setup typically signals a continuation move, often resolved by a breakout in the direction of the prior trend.

Interestingly, both a failed breakout and a failed breakdown have occurred within the structure, suggesting strong consolidation. Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_3

Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_3

ETH/USD daily price chart. Source: TradingView

A decisive move above the pennant’s upper boundary could push ETH toward the $3,400 level by August. Some indicators even see the price hitting $5,000 by year’s end.

Ethereum’s cost basis distribution heatmap shows the $2,500–$2,536 range as one of the strongest accumulation zones in recent months, according to Glassnode data. Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_4

Ethereum 'Mega Whales' Are Stacking Harder Than Pre-95% Rally in 2022_4

ETH cost basis distribution heatmap. Source: Glassnode

Over 3.45 million ETH have their cost basis within this range, underscoring it as a key support level.

Such a heavy concentration of long-term holders near $2,500 reinforces the idea that Ether’s current consolidation phase is forming a solid foundation for the next leg up.

Source: Cointelegraph

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Adam

Economic

President Donald Trump and his administration are racing to get trade deals done ahead of a self-imposed deadline, at which point tariffs are set to rise for dozens of countries across the world.

News about the on-again, off-again tariffs has become such a daily fixture of the second Trump administration that, at times, it can be hard to remember why the president started down this path in the first place. Trump has given many different reasons for why he believes tariffs are a crucial part of his policy agenda, but they can be categorized into four main goals:

Restore America’s manufacturing prowess.

Grow US revenue.

Equalize the balance of trade.

Pressure foreign countries into setting policies that benefit the United States.

Trump has often treated tariffs like a panacea — a catch-all economic tool that can simultaneously restore blue-collar jobs, pay off the US deficit, bring foreign nations to heel on key disputes and reduce Americans’ tax burdens.

In his first months in office, Trump has used tariffs to make progress on each of those goals.

Some companies have announced that they’ll invest in US factories, citing the costly tariffs. Tens of billions of dollars of tariff revenue are coming in to the United States every month. America’s trade deficit was cut in half in April — a dramatic decrease. And Trump has brought several countries to the negotiating table after threatening high tariffs — all without dramatically increasing inflation.

However, early indicators of success may be more of a sign of an initial shock to the system, as companies, consumers and businesses make rapid adjustments to the new reality of higher US tariffs.

Economists and business leaders maintain that tariffs probably won’t lead to a major American factory boom. They argue revenue from tariffs will remain a drop in the bucket compared to the massive budget deficit that was just exacerbated by Trump signing his expensive domestic policy agenda and tax cuts into law. Tariffs and trade deals probably won’t dramatically increase demand for US goods in foreign countries. And some trading partners have already shown there’s a limit to how much tariff threats can achieve.

Manufacturing jobs

“I’m telling you, you just watch. We’re going to have jobs. We’re going to have open factories. It’s going to be great,” Trump said on Air Force One in March.

To accomplish that, Trump has often advocated for lower taxes at home and higher taxes for goods made abroad.

Trump during his joint address to Congress in March made an oft-since-repeated threat: “If you don’t make your product in America, … under the Trump administration, you will pay a tariff and, in some cases, a rather large one.”

Trump has notched a handful of early PR victories after imposing tariffs. Apple in February said it would invest $500 billion in US manufacturing. GE Appliances said last month it would also spend a half a billion dollars to move a factory from China to make washing machines in the United States. And General Motors said in June it would spend $4 billion to increase its production in the United States. Many other companies have made similar announcements.

However, many of those decisions were made prior to or independently of Trump’s tariffs, the companies say. That’s because factories can take years to plan, build and begin operations.

Another major complication: Skilled manufacturing labor is hard to come by in the United States. That’s why in May, the Labor Department reported 414,000 job openings in the manufacturing sector: There just aren’t enough people in the United States who want to or are skilled enough to complete the work. And American labor can be much more expensive than in other countries. That’s why some industry experts estimate the cost of an iPhone would surge to over $3,000 if it were made in the USA.

Meanwhile, manufacturing jobs are not booming — quite the opposite. After Trump declared victory with gains of 9,000 manufacturing jobs in his first two full months in office, they have since tumbled by 7,000 jobs in each of the past two months, and the number of manufacturing jobs is now lower since Trump took office than when he started.

Tariffs may ultimately help to restore some manufacturing in America. But as Trump routinely reminds companies: If you make products in America, you pay no tariffs. That means if companies do as Trump asks, then America can’t raise tariff revenue from them.

Raising revenue

Trump has made astronomical estimates about how much money tariffs can raise, arguing tariffs could bring in trillions of dollars in annual revenue.

“We’re going to make a lot of money, and we’re going to cut taxes for the people of this country,” Trump said before boarding Air Force One for his return from Pope Francis’ funeral in April. “It’ll take a little while before we do that, but we’re going to be cutting taxes, and it’s possible we’ll do a complete tax cut, because I think the tariffs will be enough to cut all of the income tax.”

To accomplish that, tariffs would need to be exceedingly high — significantly higher than the already historic levels at which the Trump administration has set them today, or even the 60% to 70% Trump threatened to impose on some countries beginning in August.

The federal government raises about $3 trillion a year from income taxes. The United States also happens to import around $3 trillion worth of goods annually. So that means tariffs would have to be at least 100% on all imported goods for the levies to replace income taxes, said Torsten Slok, chief economist at Apollo Global Management.

It’s not quite that simple: Demand would fall as prices rise. So Slok estimates tariffs may have to be set at 200% to replace all federal income tax revenue.

Tariffs aren’t bringing in anything close to that amount right now: The Treasury Department said Trump has raised less than $100 billion in tariff revenue since taking office, bringing in around $20 billion a month in each of the past several months.

But there’s a problem: Some of the most punishing tariffs aren’t designed to remain in place that long. The Trump administration, for example, has placed 25% tariffs on Canada and Mexico and 20% on China to incentivize them to reduce the flow of fentanyl into the United States. If that is successful, Trump has said the tariffs will “come off.” And his trade deals are set to lower the tariff rate on some countries’ goods and services — not raise them.

Restoring fairness

Trump has often spoken about tariffs in terms of “fairness,” saying other countries are “ripping off” Americans with high trade barriers. He has repeatedly said he envisions America as a highly desirable department store and views tariffs as a “cost of doing business in America.”

As a result, Trump on April 2 introduced “reciprocal” tariffs, which were calculated by effectively measuring America’s goods trade deficit with foreign countries and cutting that in half. So the countries from which America imported a large number of goods but exported little were punished with the highest reciprocal tariffs.

When America is charged a higher tariff and has a trade imbalance with other countries, Trump has often incorrectly labeled that a “subsidy” or a “loss.” But economists largely agree that trade deficits are not losses or subsidies. In fact, they can be a reflection of a strong economy.

Nevertheless, Trump’s tariffs initially had a major effect on the goods trade deficit, narrowing it from about $130 billion in April to around $60 billion in May, according to the US Commerce Department. US imports tumbled, primarily as 145% tariffs the Trump administration imposed on Canada created an effective blockade on Chinese goods entering the United States. The trade gap widened again in May after tariffs fell on Chinese goods and as foreign countries reduced their purchases of US exports.

Over time, however, tariffs aren’t likely to meaningfully narrow the trade gap America has with other countries, economists argue. Many countries make goods more cheaply in other countries, and many products simply cannot be grown or produced in America.

If the trade gap continued to fall, it could be a signal that America’s spending power was diminishing.

Pressuring countries

Trump has repeatedly threatened tariffs as a kind of anvil dangling over the heads of countries, companies or industries. On Monday, he posted two letters on Truth Social, to the heads of South Korea and Japan, noting that both countries will face a 25% tariff come August 1. That deadline potentially gives countries more time to negotiate deals. And the subjects of Trump’s tariff threats have, at times, immediately come to the negotiating table.

The most recent example was last week, when Canada backed off its digital services tax that was set to go into effect. Trump had railed against the tax on online companies, including US corporations that do business in Canada. He threatened to end trade talks with America’s northern neighbor. Trump also said he would set a new tariff for Canada, which ultimately backed down, saying it would drop the tax to help bring the countries back to the table.

But it doesn’t always work. Trump’s tariffs have not stopped the flow of fentanyl into the United States, although that was always an unreasonably lofty goal. The threat of tariffs has also failed to convince Apple to bring iPhone manufacturing to the United States, Hollywood to make more movies in Los Angeles, or US automakers to close their Canadian and Mexican factories.

If and when targets of tariffs ultimately acquiesce to Trump’s demands, those tariffs also have to go away, which hurts the administration’s revenue-raising goals.

The big contradiction

Trump has notched several early wins with his tariffs — both politically and economically. But, in the long run, tariffs probably can’t achieve all of his lofty goals at the same time. That’s because Trump’s aims are often contradictory.

For example, if tariffs are a pressure campaign, they have to go away once the countries acquiesce — meaning there will be no tariffs to restore the trade balance. If tariffs are designed to promote America’s manufacturing sector, they can’t also raise revenue to offset deficits. If Americans switch to made-in-the-USA goods, then who pays the tariff on foreign products?

When used effectively, tariffs can help boost production at home by making foreign goods more expensive. Because America is an enormous and diverse economy that doesn’t rely on trade as much as its neighbors, the United States could use tariffs to inflict serious damage on other countries’ economies without plunging itself into a recession. Revenue raised by tariffs could help offset some of its deficits.

Achieving all those outcomes simultaneously, however, may not be possible.

Source : cnn

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Warren Takunda

Economic

Pretty soon, every newborn American will be the proud owner of their very own “Trump account.”

President Trump's sprawling tax law creates a new, tax-advantaged investment account prefunded with $1,000 for each child born from the beginning of 2025 through the end of 2028. Kids born before this year are eligible for the IRA-style accounts but not the $1,000 seed money.

The idea’s backers say the accounts are a way to get all kids into saving and investing early in life, while helping them save for goals like college or a home.

But financial advisers who spoke with Yahoo Finance warned that, aside from the free seed money, the benefits the accounts offer are relatively paltry compared to other tax-shielded savings options Americans already have available, including the 529 accounts parents use to put away money for college and IRAs for retirement. The new Trump accounts also come tied up with a fairly complex and potentially confusing set of rules.

As a result, putting any money into them beyond what the government offers might not make sense for most families, they said.

“It’s not very attractive,” Ann Reilley, CEO of Alpha Financial Advisors, said of the program. “It just seems like they’re complicating things for no reason.”

Under the new program, parents will have the option to open Trump accounts for any child under age 18 at a bank of their choice. Contributions will be capped at $5,000 per year, including up to $2,500 tax-free from a parent's employer. The money grows tax-free until it’s withdrawn and must be invested in a broad stock index.

Account holders can make partial withdrawals when they turn 18 and access the full amount at age 25, but only for "qualified purposes" including paying for college, starting a business, or buying a first home. They get full access to the funds at age 30 to use for any purpose.

Once cashed out, distributions will be taxed as long-term capital gains if the funds are used for a qualifying purpose. Money spent on anything else will be treated as ordinary income.

Overall, it’s a less generous deal than putting money into a 529 account for higher education or Roth IRA for retirement, since both of those options allow investors to withdraw their money entirely tax-free.

The Trump account could theoretically be useful for families who are already comfortable with their retirement savings and whose children don’t plan to pursue college, since the money can be used for other purposes like homebuying without a penalty. But even then, there might be pitfalls.

For instance: Say a child ends up spending the money on anything other than education, a business, or a house and gets hit with the higher ordinary income rate. In that case, their family would have been better off investing in a normal brokerage account, said Zach Teutsch, a managing partner at Values Added Financial.

“The giving kids money aspect is generally good,” Teutsch said. “The account structure seems ill-considered.” He added that a family would need to be “shockingly sure” that their child wasn’t going to college before it would make sense to invest in a Trump account instead of a 529.

The concept of providing every child a small, prefunded investment account isn’t new in Washington. Progressives have long-pitched a version of the idea known as “baby bonds,” which they’ve argued could help close the racial wealth gap. Among Republicans, Texas Sen. Ted Cruz is credited for originating the Trump account proposal — he called them Invest In America Accounts — which he has described as a way to help hook kids on investing and broader capitalist values.

“There are many Americans who don’t own stocks or bonds, are not invested in the market, and may not feel particularly invested in the American free enterprise system. This will give everyone a stake,” Cruz recently told Semafor.

The experiment is not especially expensive in the scheme of the GOP’s massive tax package: Trump accounts will cost the government about $17 billion over 10 years, according to Congress’s Joint Committee on Taxation. But Republicans appear to have kept costs down in large part by loading the proposal with restrictions that limit the value of the program, said Alan Cole, a senior economist at the Tax Foundation.

“It’s like, thank you, government, for the free money, but I care about the usefulness,” Cole said. “And realistically, this is the sixth or seventh best tax-free savings account option.”