Only the markets can stop Trump now
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Shoshana Gordon/Axios
President Trump's gone maximalist again on tariffs, and just like the last time, it appears the only thing that could stop him is a market meltdown.
Why it matters: Stocks seem very, very disinclined to stop the historic rally they've been on for the last three months.
Catch up quick: Every few hours this week, Trump has thrown down another trade gauntlet.
- 50% levies on Brazil, 35% levies on Canada, threatens to raise the baseline tariff rate against other countries — nothing is stopping Trump's base instinct to use tariffs as one of the most powerful levers of his presidency.
The intrigue: His view on the reaction — and what really matters — is also now incredibly clear.
- "I think the tariffs have been very well-received. The stock market hit a new high today," Trump told NBC News Thursday night.
Zoom out: Stocks fell to the brink of a bear market in early April after Trump first imposed his sweeping global tariffs.
- When he paused them a week later, that triggered what has become one of the strongest short-term rallies in history, according to data from Ryan Detrick, chief market technician at the Carson Group.
Between the lines: Plenty of strategists believe that rally has been fueled in part by the so-called TACO trade: the assumption that "Trump Always Chickens Out" and pulls back from the most grave tariff threats.
- But the more intense those threats get, the more at-risk the markets are if he doesn't pull back quickly.
- The record highs have, in effect, emboldened the president to double down (almost literally) on the trade war.
What they're saying: "Something tells me that the President will not back down unless the market delivers him an April-proportioned message," writes Mark Malek, chief investment officer at Muriel Siebert & Co., in a note.
- Malek noted that the first 21 letters sent out by the administration indicate a weighted average tariff of 30%.
- That's about triple what the market is currently pricing in for levies.
Friction point: That's the other problem, per no less than JPMorgan Chase CEO Jamie Dimon — how the market is pricing current conditions.
- Dimon said Thursday markets are "a little desensitized," adding that investors are underpricing the risk of Fed hikes off the back of tariff-driven inflation, immigration policy and the increased deficit.
- He warned of "complacency in the market" being a major threat.
What to watch: The market is now back on the tariff clock, as it's been over and over again this year.
- The new trade deadline is August 1, and while there's still plenty of time, nerves will inevitably increase as the days grow shorter.
- "Eventually, asset markets catch up," said Bob Elliott, chief investment officer at Unlimited Funds.
The bottom line: Sometimes the sequel doesn't hit like the original.
- These tariff threats are looking very similar to the April levies, but investors have seen this movie before and lost out on the post-volatility rebound.
- They won't be burned again — and that could be their downfall.
