Like when then-presidential candidate Donald Trump opened an event honoring Purple Heart recipients with a joke. He just sent a sharp signal to U.S. courts regarding his inscrutable tariff policy. In October, U.S. Trade Representative Robert Lighthizer issued his own warning that any court decision against his tariffs would result in catastrophic economic consequences for the country. Perpetuating the myth, Trump touted the success of his tariffs on the stock market. If they were removed, he warned, it would take the economy down into a depression on the order of the Great Depression.
Trump’s comments were made as a federal appeals court was considering what to do about his wildly unpopular tariff policies. He noted that the success of these tariffs was responsible for most of the recent stock market gains. Just weeks after triggering a 90-day pause on all “liberation day” tariffs in early April, news of his decision caused a 7% spike in the Nasdaq Composite. In fact, other leading stock indices closed sharply higher too during that fateful week.
We understand that you might be persuaded that stopping this tariff policy will turn into a death blow to financial development. “If a Radical Left Court ruled against us at this late date, in an attempt to bring down or disturb the largest amount of money, wealth creation and influence the U.S.A. has ever seen, it would be impossible to ever recover, or pay back, these massive sums of money and honor,” Trump declared.
As the former president justly pointed out in fiery terms, this judicial ruling could lead to an economic disaster. He cautioned that it might look like the 1929 Great Depression. “It would be 1929 all over again, a GREAT DEPRESSION,” he warned, underlining his belief in the critical role tariffs play in sustaining economic growth.
If investors doubt, it’s for good reason – in the past when Trump has indicated a lowering of tariffs, markets have responded with elation. Yet, they react violently when he calls for the raising of tariffs. This pattern begs the question of what all of this will mean in the longer term for investor confidence in his policies.