Tariff Disaster?

President Trump’s announcement of sweeping reciprocal tariffs has thrown the global markets into a tailspin. The tariffs are more severe than most “worst-case scenario” estimates had been.

 As of today, the policy details point to some of the most aggressive trade actions in recent history, with tariff levels that exceed those imposed during the Great Depression! Vietnam, for example, is facing a 46 percent tariff, while China’s rate has surged near 70 percent. These figures are not based on actual tariff reciprocity, but rather on trade surpluses, which creates a disconnect between the policy’s stated goals and its likely economic consequences.

Consequences indeed, the DOW is down over 1,400 points and the S&P 500 has lost 4% today. From a research and portfolio management perspective, we are treating this as a serious development. Even if these actions are intended as a negotiating tactic, the impact is immediate. Markets are selling off, corporate leaders will pause investment decisions, and analysts across the board are revising earnings forecasts downward.

Despite the severity of the situation, we do not believe this is the end of the story. These tariffs are extreme and likely, unsustainable. The most probable outcome remains that this is the beginning of a broader negotiation, and we expect adjustments or reversals in the months ahead.

We are paying particularly close attention to three indicators. First, market price action, which has been weak, with little evidence of buyers stepping in. Second, international response. Quick negotiations would be constructive, while retaliatory measures would escalate risk. Third, the Federal Reserve. Chairman Powell is set to speak Friday, we will be watching closely for any shift in tone or policy stance that acknowledges the growing economic risk.

Markets don’t wait, markets move fast (as we have seen today), and policy changes much slower. That gap creates risk and opportunity!  Our model construction is built to take advantage of these market changes and periods of disruption. Our responsibility is to respond with clarity and discipline. Should conditions worsen, we are prepared to act decisively. If cooler heads prevail and trade policy stabilizes, we will be positioned to participate in the recovery.

Questions? Email us at hello@croakcapital.com or call (419) 464-7000.