The announcement of Trump 2.0 tariffs on imports from Canada, Mexico, and China triggered a stock market sell-off. The tariffs are aimed at bringing manufacturing back to the US, raising revenue, and negotiating trade deals. However, concerns remain about the potential impact on global economic growth and US exports.
The markets certainly didn't give a ringing endorsement to Trump 2.0 tariffs announced on Friday: 25% each on Canada and Mexico and 10% on China. During his presidential campaign, Trump talked about 60% on China. After that, stocks sold off.
Treasury Secretary Scott Bessent told senators during his confirmation hearing that tariffs will be used to bring manufacturing back to the US, to raise revenues to help pay for extending Trump's 2017 tax cuts and to use as a lever to negotiate with other countries . We note that during Trump 1.0, tariff hikes by the US seem to have depressed merchandise imports in 2018 and 2019. But they also depressed US exports because global economic growth was weakened by trade tensions .The Q4-2024 earnings reporting season has been a solid one, with industry analysts currently projecting a 9.2% y/y increase inAnalysts already had been lowering their expectations for Q1- and Q2-2025, which are down to 9.8% and 10.7% . Trump 2.
“I expect it is going to be a trainwreck. No ‘big, beautiful bill’ done by May 1. Expect a jalopy held together with scotch tape and chewing gum to wheeze across the finish in time for August recess—maybe.”
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