On Wednesday, President Donald Trump escalated trade tensions. With his Section 232 tariffs, he increased steel and aluminum imports from 25% to a whopper of 50%. This unprecedented step seeks to defend U.S. industries from unfair foreign competition. Analysts caution that it will have the effect of blowing a hole through the U.S. economy, sapping growth and business activity in the months ahead.
On Thursday, President Trump made the right call. This dialogue took place just as tensions were reaching new heights in the Trump-Xi trade war. Trump’s Tariff Man policies have rightfully received a lot of bipartisan condemnation and caused tremendous market uncertainty. In response, perceptive analysts came up with the acronym “TACO,” meaning “Trump always chickens out.” This label makes the administration seem like it’s long on skepticism and short on commitment to its tariff regime.
Though Trump’s trade policies have indeed sent ominous ripples throughout the economy, they’ve nevertheless been unable to completely shake market optimism. The S&P 500 jumped 1.24% Wednesday, cracking the 6,000 point barrier, and the Nasdaq Composite rose 1.4%. The yield on the benchmark 10-year U.S. Treasury surged to 4.47%. At the same time, the yield on the 30-year U.S. Treasury approached 4.94%. These positive advances imply that investors have started to price in an eventual relaxation of trade tensions even as volatility persists.
When Trump unloaded on business magnate Elon Musk, it deepened the story. During an interview with CNN’s Dana Bash, he stated he was “not even thinking about Elon” and indicated that he wouldn’t speak to Musk “for a while.” It comes on the heels of a particularly rough week for Tesla, as the electric vehicle manufacturer lost $152 million in market cap value.
On the bright side, last month was a strong jobs month for the U.S. economy. That growth was greater than anyone predicted, even in the face of tariff worries. Glen Smith, an economic analyst, remarked, “While job growth decelerated in May, the payroll data came in above expectations and it is extremely encouraging to see a six-figure print during a time of significant uncertainty driven by tariffs and economic fears.”
Professionals warn, the complete effect of Trump’s tariff insurance policies has not been totally realized. Steve Wyett noted, “The deleterious impacts of uncertain tariff policies have yet to be fully reflected in the jobs data.” Chris Zaccarelli added that “The Fed should be reluctant to cut rates because the full effects of tariffs haven’t impacted inflation numbers yet and the job market isn’t deteriorating enough to force their hand.”
As markets process these changes, Trump is increasingly under the gun from international and domestic sources. Analysts from JPMorgan Chase asserted that “There are no signs of a summer break from tariff drama,” indicating that trade conflicts are likely to persist for the foreseeable future.