Donald Trump announced aggressive tariffs on a minimum of 14 different nations. These tariffs are set to go into effect on August 1. The announcement triggered immediate reactions across the market. The Dow Jones Industrial Average was down 0.94% on the day, while the S&P 500 and Nasdaq Composite closed down 0.79% and 0.92%, respectively. Analysts, including Jim Cramer, went apoplectic at the prospect of such tariffs, saying that they would cripple the stock market and upend the economy.
The tariffs indiscriminately hit the most active source of non-compliant actions. Trump posted screenshots of letters concluding new tariffs, from the leaders of Japan, South Korea, Malaysia, Kazakhstan, South Africa, Laos, and Myanmar. These letters were followed by similar letters addressed to the leaders of Bosnia and Herzegovina, Tunisia, Indonesia, Bangladesh, Serbia, Cambodia, and Thailand. This appears to be a strategy designed to force these nations to fall in line with U.S. trade priorities.
Jim Cramer, the host of CNBC’s “Mad Money,” discussed the situation during his segment on the CNBC Investing Club’s Chartable Trust. Here’s what he had to say on the recently announced tariffs. He cautioned that it would be “a hell of thing” if those numbers were to become final. Cramer urged investors not to short the market, which he called overbought at this point. He predicted that we will soon see a wave of additional sellers as investors begin to realize the effects of the new tariffs.
“I don’t want to be glib. I know we’re staring down the barrel of a tariff gun.” – Jim Cramer
Cramer noted that the Trump administration was always kicking tariffs down the road or scaling them back. They accomplished this to use as a negotiating chip against other countries. He showed optimism that these onerous new regulations could be amended through the legislative process. He warned that if more countries “refuse to play ball with President Trump on trade,” they might receive similar letters from the White House.
On trade, contrary to the Trump admin’s less explicit—or at least less articulated—goal of building new domestic manufacturing plants, the EU strategy is much more export focused. As we reported before, Cramer repeatedly asserted that the currently proposed tariff numbers are meaningless. If confirmed, this would be a reversal of investor sentiment about the prospects for the nascent post-2021 market.
“We no longer believe that the tariff numbers the president’s throwing around are meaningful.” – Jim Cramer
As you may have seen, last week the House of Representatives passed Trump’s megabill. This recent announcement goes to show that the bill does more to affect the market beyond just trade policy alone. As these advancements continue, market investors will watch closely in anticipation as they gauge investor response to Trump’s tariffs. They will review if these tariffs result in permanent shifts or agreements between the U.S. and the countries targeted by the tariffs.