The best case for Trump's tariffs
A tug-of-war between tariff hard-liners and pro-trade advisors leaves jittery markets waiting on Trump's next make-or-break reversal.
US President Donald Trump skipped his regular Mar-a-Lago tee time to instead spend the weekend at the Vatican for the funeral of Pope Francis, where he even found the time to squeeze in a one-on-one with Ukraine's President Volodymyr Zelensky.
Trump also ramped up his public criticism of Vladimir Putin, writing:
"There was no reason for Putin to be shooting missiles into civilian areas, cities and towns, over the last few days. It makes me think that maybe he doesn't want to stop the war, he's just tapping me along, and has to be dealt with differently, through 'Banking' or 'Secondary Sanctions?' Too many people are dying!!!"
So no peace deal, or perhaps a necessary wake-up call for Trump that will now see him negotiate with a more realistic understanding of Putin? I'm not sure, but Trump's promise to end the war in his first 24 hours as President, which then became his first 100 days—i.e. tomorrow (US time)—is looking rather unlikely.
But beyond foreign policy theatrics, what I really wanted to look at today was Trump's tariffs and their impact on markets. Believe it or not but despite all the wild gyrations since the 2 April 'Liberation Day' tariffs, the S&P500 is more-or-less flat for the month.
The largest moves in both directions coincided with a Trump policy announcement, which itself depended upon which advisor instigated it.
But who will get the final word?
We all know what's likely to be the worst downside scenario: Trump listens to convicted criminal and current trade advisor Peter Navarro, does another about-turn on his ridiculous 'Liberation Day' tariffs and effective embargo on China by announcing that they're here to stay, Congress does nothing to stop it because Republicans are scared of the backlash and Democrats know it'll help them in next year's mid-terms, the US economy sinks into a stagflationary recession, its debt crisis draws nearer, and global growth is dragged down along with it.
The most recent IMF World Economic Outlook said as much:
"Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near universal levies on April 2. The US effective tariff rate surged past levels reached during the Great Depression while counter-responses from major trading partners significantly pushed up the global rate.
The resulting epistemic uncertainty and policy unpredictability is a major driver of the economic outlook. If sustained, this abrupt increase in tariffs and attendant uncertainty will significantly slow global growth."
But what about the best case?
