Over the last few days/weeks we have seen multiple actions done by Trump. Currently, it seems Trump is doing too many random things that the market starts to take him less seriously and the impact of his decision making is getting smaller.
tariffs on Mexico, Canada & China
We saw a significant downtick on Monday in the S&P of 2% in the early morning, after Trump announced 25% tariffs on Canada & Mexico. These kind of tariffs would put Canada and Mexico in recessions if they would be introduced and active for a while. Trump put these tariffs on Canada & Mexico as in his opinion these countries are doing something that is unfair. Whether it is unfair trading practices, not checking the borders well enough or anything else. Trump will find a reason to put tariffs on your country to be able to get what he wants. With a normal dialogue he is unable to achieve his goals.
Inflation issue
Trump has a lot of power as being the president of the most powerful country, especially from a economic perspective. So, counterparties need to take him seriously. Though, putting tariffs on many important trade partners is not going to help anyone in the long run. Trump has been always accusing Biden of creating too much inflation. With putting tariffs on trade partners, Trump will make goods more expensive for the consumers. He will most likely add to the inflation while trade tariffs have no positive effects for the production levels and the economy.
After talking to Canada and Mexico, Trump did suspend the tariffs for 1 month. So he is crawling back a bit already on day 1. Canada and Mexico are finally listening to him so that is why he said he did suspend the tariffs. So far, Trump is barking but not biting. The same can happen with the China tariffs. China tariffs he raised with only 10% extra (upon what Trump and Biden did in the past) and he aims to visit China soon. Where he probably will make a ‘great’ deal according to him.
Barks too much
Trump wants Greenland, requires European countries to pay 5% of GDP each year to NATO, wants to clean Gaza and take it over, etc. He is wanting too much and everyday he has something new. The rest of the world slowly starts to take him less seriously and this will not work in his favor. For many of his policies he needs some support from his allies. As his allies are important trade partners and let not forget also strong investors in the US. When he gets taken less seriously, his actions will most likely start to have a dampening effect on the market impact. The market is getting less scared.
Market getting less scared
Over the last days we have seen volatility coming down as the market gets more used to Trumps ‘Bark but not Bite’ policies. The more he barks, the less impact he will be having. Less is more, but he is old enough to not learn anymore and keep barking.
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