Bloomberg Businessweek ICYMI: More Trump Market Volatility
Apr 8, 2025
Cheryl Smith, an economist and portfolio manager at Trillium, dives into the turbulent waters of market volatility driven by Trump's trade war. She discusses the unpredictable changes in stock, bond, and commodity prices due to inconsistent tariffs. Smith also analyzes how rising Treasury yields are reshaping investor behavior and the Federal Reserve's cautious approach. Lastly, she highlights the historical implications of tariff policies, drawing parallels to past economic crises and the looming risk of recession.
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Trump's Tariff Strategy
- Trump thrives on chaos, using it to keep people off balance and gain an advantage.
- His unpredictable tariff policy, switching between imposing and lifting them, fuels this chaos.
Fed's Response to Tariffs
- The Fed is unlikely to intervene with rate cuts to offset the tariff effects, showing concern but lacking data.
- Emergency rate cuts by the Fed would send a worse signal than inaction, adding to market instability.
Economic Impact of Tariffs
- Trump's tariff policy has dire economic consequences, comparable to the Smoot-Hawley tariffs of 1930.
- The escalating trade war disrupts global trade based on comparative advantage, hindering economic growth.