Wall Street’s Trump supporters — and they are legion — were riding high.
They cheered a completely sentient president who took office promising to enact a bold agenda of tax cuts, deregulation and un-woking college campuses, including Ivy League institutions many of them attended.
Then came the trade war. Trump is not only blowing up the markets (aka their livelihoods), they fear, but the economy and probably his presidency along with GOP control of Congress when the midterms come next year.
He could even be paving the way for the word-salad queen, Kamala Harris to re-emerge in 2028.
I’m not saying I subscribe to this doom and gloom. I hold out hope that The Donald will live up to his wheeler-dealer rep and make sure those very stiff tariffs on every trading partner in the world really are “reciprocal,” as he said they would be when announcing the move this past week.
The hope is they will be modified downward amid a flurry of negotiation with countries that should have as much to lose as we do. Markets will rebound as fast as they’ve been tanking. The economy will solidify around his tax cuts and deregulation.
But here’s what the naysayers keep reminding me: China could suck it up for a while. They’ve hit us with their own sanctions, hoping to crater our economy while it plays a long game. After all, their “president for life,” Xi Jinping, isn’t exactly going anywhere.
Europe might do the same, as could Canada and Mexico. They might think they can get more out of Trump if he has a severely compromised economy to work with.
Even scarier, say these tariffs aren’t a “reciprocal” negotiating tool for Trump to take down our perpetually large trade deficits. He really believes they’re great for the economy.
Rigid adviser
Their nightmare scenario has Trump firmly in the camp of his ideologically rigid economic adviser Peter Navarro, a tariff evangelist, who for years has been predicting how the levies will magically restore all those lost factory jobs and remake the economy of 2025 into one that resembles the 1960s.
He’s totally aligned with Howard Lutnick, his voluble (and increasingly annoying) protectionist commerce secretary. Lutnick is an odd duck; he’s a former brokerage chief who wasn’t on the tariff soap box until he started vying for a job with Team Trump.
Now he’s trying to convince markets how the federal government can somehow plug a $2 trillion budget deficit and grow an economy with tariffs.
It’s not a good look, or the markets wouldn’t be going haywire. How can you plug a budget deficit with tariffs if those tariffs even momentarily weaken economic growth and tax receipts decline? Note to Howie: Simple logic says you can’t.
Another layer added to their world of worries: They say Trump doesn’t appear to want to listen to Scott Bessent, his erudite treasury secretary. Bessent spent years gauging the intricacies of the global markets as a hedge fund trader. He certainly understands capital flows. He knows what happens when countries stop trading with each other and adjust violently to price shocks in the form of trade barriers: Less money flows into their economies, and you get inflation because foreign goods will immediately cost more.
Last I checked, that’s called “stagflation,” and if you grew up in the 1970s like I did, you know it’s no fun.
Bessent is watching the bond market and how the yield on the 10-year bond is falling below 4%, a sure sign that some smart people think this trade stuff will crush growth. I hear he’s quietly trying to outflank Navarro and Lutnick before the price shocks turn into inflation.
Whatever he’s doing obviously isn’t working, the cynics remind me. Bessent is either in the doghouse, or has been reduced to Trump’s in-house lap dog.
Keep in mind the Wall Street crowd misread Trump before so they might not be the best predictor here. They thought he was all bluster on trade; he would leave tariffs for last, maybe when the economy was humming.
He didn’t — as we’re now all so painfully aware.
That’s why I still think Trump will make a deal when he sees many more 1,000-plus-point declines in the Dow (or 2,000-plus drops like on Friday) and companies ramping up layoffs. Going cold turkey on trade will do that. The logical thing to do is negotiate and declare victory, and Trump loves to win.
Pragmatic dealmaker?
A caveat to my optimism was provided by a friend of mine who knows Trump well. This mutual friend recently explained to me that yes, Trump is the ultimate pragmatist and dealmaker, except maybe when it comes to curing our trade deficits. He hates that countries screwed us for so long, and over the years he’s come to believe that tariffs can work economic miracles.
That’s why he didn’t negotiate and instead opted for the tariff sledgehammer last week. He doesn’t see tariffs as a tax on goods that will be passed on to the American people and cause inflation, but a way to make US goods cheaper over time as we produce more here.
He sees the American people being consumers of our own cooking. In other words, he might not be so keen on negotiating trade peace.
God help us if I’m wrong and my pal is right.
