Unlock the Bulletin on White House
Your guide for what American choices 2024 means for Washington and the world
Facled wakefulness stock market will have to work much harder than this to tame Donald Trump.
Since Trump’s re -choice, many investors and analysts have attached themselves to the realization that it is okay, the president will not do anything too wild with economic policy, because it uses shares as a real -time gauge and avoid doing anything to harass them. A short, sharp fall in stock in response to any peculiar announcement will soon force the heart change, or so goes the theory.
That may still be true at some point. But it’s not now. Instead, the market reaction to Trump’s announcement over the weekend on immediate steep taxes on goods from neighbors and allies of Canada and Mexico, and milder additional duties about goods from China, is quite tamed.
The Benchmark S&P 500 index opened 1.4 percent lower – not great, but barely a disaster. This is a shaping as the worst day in the US market, what, a week? The immediate 5 percent of the index enters and maybe some suspension of the switches in the worst stocks of a big name may have been enough to alarm the president, but not this.
One of the possible reasons for relative peace is that it is a great slice of investors think that starting a trade war with NATO’s NATO is an active good idea – for the US economy, for geopolitical stability or both. Perhaps money managers cheered the view of the USAID to put a danger or Elon Musk department of government efficiency by gaining access to the Ministry of Finance Waterworks. Let’s say this is a theoretical possibility for now, but not the most likely explanation.
Instead, the Ho-Hum reaction, which mirrors and in a dollar (little, nothing too overturned) and in Asian and European stocks (slightly down, not bloodshed) reflects several important assumptions.
One is that, to quote John Mcenroe, it cannot be serious. The inevitable increase in costs for consumers imported goods, a potential revival in the inflation itself, Trump vowed to win, and the damage to global relationships indicates a heart change at some point. Selfishness is simply too big. As Jan Hatzius and others in Goldman Sachs said, “although the odds are unclear, we think that the tariffs focused on Canada and Mexico will probably be short -lived.”
If the opening of Trump 2.0 in the opening taught us nothing else, it is humble. None of us know if it is right or wrong. Tariffs can be removed or reduced at any time without notification. But the evidence so far this year suggests that it is dangerous to assume that they will overcome calm heads.
Another option is that investors are simply bad in reading Trump. He has been a fans of tariff for decades. He used them liberally in his first term in power. He kept talking about them in the mark of the campaign. He spoke of them on his inauguration. But the markets failed to take him to his word.
Investors thought that enlightened personal interest would give the president a break. Then they thought that Scott’s Treasury Secretary would act as an adult in the room, sensitive to the cold of the reality of economics and is able to direct the president beyond her darker urges. None of this failed.
“Trump has stopped complacency in markets, media and politics that his tariff threats should be taken with a grain of salt,” wrote Philip Marey, a strategist in Rabobank.
So, now that the markets are on low salt diet, Trump is worthy of literally and completely seriously taken in a series of geopolitical issues. One is Europe. Stock there were on a Great running Late, as the very early Trump 2.0 days did not deliver tariffs on the block. But as Trump reminded us today, he is serious in the EU, which he accused of running on Monday. “atrocity“In his trade relations with the US. Howling.
Others are Panama and Greenland. I constantly ask bankers and investors what will happen if Trump really tries to secure a new territory there. They make me laugh constantly, although one fund manager suggested the purchase of German government bonds. This becomes less funny from the day.
Even in the best scenario in which Trump supports some or all the new tariffs, a significant damage has already been done. “Even if they are short, the threats of the tariff have two consequences,” said Paul Donovan from UBS. “Consistence may make it difficult for negotiating trade agreements. If the news cycle makes us consumers afraid of actual revenue or job safety, it may be less inclined to spend. “
Economic pain, therefore, can still be real. But it is ambitious to assume that the awake Vigilants will stop him. Trump will increase this early reaction as the victory and validation of the Wall Street of his efforts to make America again great.
katie.martin@ft.com
