A couple of days ago, I talked about how the markets going south might be a good catalyst for President Trump to loosen his tariff policy.
Well, so far… somewhat good.
Right now, President Trump is sending mixed messages about tariffs — in some ways hinting they’ll slow down, and in other areas putting his pedal to the metal.
It’s a little hard to figure out where he’s going to land.
And his partner in crime in all of this is new Treasury Secretary Scott Bessent:
Between the two, messages are getting mixed, and goals are getting obscured.
What the markets really need more than anything is a clear path forward.
The markets can adjust to a “new tariff world order,” eventually. And they will certainly rejoice if the tariff boot is lifted temporarily or permanently.
But being stuck in between is never good.
With that said, there’s an argument that whatever the outcome, the market’s current slide is a short-term overreaction or repricing that:
- is very much needed, and
- mirrors what went down during the first administration.
Take a look at this chart:
That’s an indexed S&P 500 price chart showing the market movement from first-term tariffs (in green) to current tariffs (in red).
It looks almost identical through the first few months of the new administration.
The cautious case is to remember that one example is not reliably predictive of future outcomes and that this might mean nothing.
But if the pattern holds, we are near the bottom, and the markets will enter a strong rally from here.
Most of President Trump’s first term was a time of incredible prosperity in the markets, barring the brief interruption of the initial COVID shock.
As I talked about earlier this week, there is no question that Trump wants to be able to point to similar success in his second term. There’s a good argument it is one of, if not the, foremost indicators of success in his mind.
Which means, if the markets start to pull out of the nosedive naturally, then he might keep his foot down, but if they continue to flounder, I still expect we’ll see a quick reversal of policies here.
And there’s still the broader question: whether Trump actually believes tariffs are an inherent good, like one of his heroes William McKinley (and even President Lincoln), or whether he views them primarily as a bargaining chip.
My gut says he lands somewhere in the middle.
But I think the good news for traders is, there’s no way he’s committed enough to tariffs to sink the markets with them permanently.
If things don’t start to reverse quickly, I’m confident the Trump Administration will change course.
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