“Trump will fix it,” said the campaign signs. After his fusillade of tariffs, evidence abounds that Donald Trump in fact has put the country in a fix.
His “Liberation Day” announcement last week slapped Wall Street upside the head, even though he kept calling tariffs “the most beautiful word” while on the stump last year. Many Americans, it seems, weren’t listening enough to hear “tax” every time he uttered the word.
Before showing flexibility this week, Trump declared a 10% baseline tax on imports from all countries, effective last Saturday, and higher tariff rates on dozens of nations, including putative allies, that run trade surpluses with the U.S. But he stiffened the taxes Wednesday on products from China, bringing them to 145%.
Foreign autos, steel and aluminum still were in line for 25% tariffs. Trump has also imposed tariffs on countries that import oil from Venezuela, and he plans separate import duties on pharmaceutical drugs, lumber, copper and computer chips, although details were fluid.
Farmers wonder where they can send soybeans now that China is retaliating with its own tariffs. The same goes for factory workers assembling airplanes or cars — yes, we export those — packing meat or distilling bourbon. No one is safe from Trump’s worldwide retribution tour—not even penguins.
Tariffs are high octane for inflation. The effects will hit soon, from canceled construction jobs to price spikes in the produce aisle. Too bad you can’t stockpile avocados.
It’s no wonder Trump’s brand of shock and awe creates confusion. Depending on the day, tariffs are permanent or a temporary negotiating tool, a way to raise revenue, protect American products or reindustrialize the heartland.
On Sunday, U.S. Commerce Secretary Howard Lutnick was on TV saying the levies will come fast and will stick. “There is no postponing. They are definitely going to stay in place for days and weeks. That is sort of obvious. The president needs to reset global trade,” Lutnick said.
Trump took to Truth Social Wednesday to say they would be postponed for 90 days, declaring the Oval Office open for business. He said more than 75 countries want to make a deal.
Conflicting aims ensure failure. And — a dirty little secret — tariffs give domestic companies leeway to raise prices.
Analyst Maurice Obstfeld, writing for the Peterson Institute for International Economics, summarized what the nation faces. “The result will be a direct hit on U.S. consumers and businesses. No wonder the stock market is swooning,” he said.
Stock market swings
The market hit deep declines last week and this week spun into a tizzy, volleying large intraday moves back and forth including a double-digit percentage gain Wednesday after Trump’s tariff postponement. Stocks tumbled again Thursday. A widely followed and Chicago-born “fear index” for the stock market, the Cboe Volatility Index, known as the VIX, has risen to levels not seen since the pandemic hit in 2020.
The mainstream S&P 500 had flirted with “bear market” losses of 20% from its recent high. It and other indexes were firmly in “correction” territory, or losses of more than 10%, compared with highs in recent months. Corrections are rather common, but this one felt portentous because it was so unrelenting and worldwide in scope, dependent on executive whim.
Trump has managed to galvanize the left and right in opposition to tariffs, everybody from Bernie Sanders to Ken Griffin. Jamie Dimon, chairman and CEO of JPMorgan Chase, posted a letter to shareholders Monday saying tariffs are likely to stoke inflation, slow the economy and isolate the United States. “America will be first — but not if it is alone,” Dimon said. Hedge fund billionaire Bill Ackman took to X to call the tariffs “a major policy error.”
After Trump uncorked the tariff blasts last week, economists Carl Tannenbaum, Ryan Boyle and Vaibhav Tandon at Chicago’s Northern Trust foresaw the upcoming gamesmanship of levies and retaliation. “This round of measures and counter-measures will do substantial damage to the economies involved,” they wrote. “Odds of recession in many markets have risen sharply. Inflation pressures and inflation expectations are rising.”
They added, “Some analysts argue this week’s policies are temporary, expecting negotiations to begin soon, proceed productively, and result in amelioration. We are not so sure. Little in the first 10 weeks of the Trump Administration suggests a willingness to de-escalate. Trump’s comments accompanying the tariff revelation characterized the global trading system as a series of mistakes working against the nation’s interests. Minor concessions will not overcome an intent to rebuild the global trade order.” That broad goal takes time, they said, while “the American brand” overseas is damaged and allies build trade networks without the U.S.
Weighing risk
So what’s a caring person to do — as an investor and an American?
“Investor” accurately describes most people, even those who don’t see themselves as playing in high finance. Working folks with 401(k)s do it by rote, as they should. To take care of yourself for later years, there’s really no choice but to “go long,” as traders say, meaning buy stocks and bonds and the funds thereof. Markets are good at creating returns well above inflation. If you look at the record over many years, even bear markets look tame.
Time, in fact, is what young or mid-career investors have in their favor. It unlocks a superpower of math. Invest regularly and you enjoy compound interest, profit made on prior profits. It’s like daily workouts that build money muscle.
“Staying the course,” the common financial advice for times like these, is hard, though. Scary markets tap into our egos and emotions. Some will want to sell everything.
“In other words, when you’re in your 20s, 30s, or even 40s, your risk capacity is high, but your risk tolerance may not be,” said Christine Benz, director of personal finance and retirement planning at Morningstar.
Older workers and retirees face different challenges but there’s consolation all around. For everyday investors, it’s a golden age. Most stock trading is commission-free and fees to invest in funds have dropped dramatically. That’s courtesy of funds that popularized low-cost investing in broad indexes and perform better than funds run by stock pickers. Many funds are organized to deliver income, often monthly rather than quarterly as with most stock dividends. Just avoid the gimmicky funds that promise three times your gain (and loss) on the latest meme stock.
Others will try to outguess the markets. But whether you turn tail and sell or double down, gut reactions seldom end well. Articles on this subject go on at length and quote savants from past and present, such as Benjamin Graham, Peter Lynch and Warren Buffett. It’s all good advice about patience, even if it assumes you check stocks most of your waking hours.
It’s just me, but I’m channeling Howard Beale, the fictional news anchor who became a ratings smash when he lost his mind in the 1976 movie “Network.” In a script written long before social media took a hacksaw to attention spans, Beale told his audience to choose independent thought over commercialized conformity. “So turn off your television sets. Turn them off now! … Turn them off right in the middle of this sentence …”
Righto. Today, that would apply to Facebook feeds and the yammering heads on the cable news shows. Break away from it all. The weather is getting nicer. Take pleasure in family, friends, hobbies and the outdoors. The stock market will cool down on its own.
While the tariff blowup continues, it’s worth recalling that the U.S. saw this before. It was 1930 when Republicans in power passed the Smoot-Hawley Tariff Act, setting off a trade war that experts say worsened the Great Depression. The Senate’s own website calls it “among the most catastrophic acts in congressional history.”
An election happened in 1932 and the new president, Franklin D. Roosevelt, lowered tariffs. FDR probably is the greatest president not on Mount Rushmore. Trump no doubt has a different view.
David Roeder wrote the paper’s Curious Investor column from 2004 to 2012.