Futures markets are substantially lower as U.S. stocks get ready to open. Futures on the Standard & Poor’s 500 were down 1.64% and NASDAQ futures were off 1.87%.
But I still say that Wall Street is in denial about the full economic damage from President Donald Trump’s tariffs.
Yesterday Goldman Sachs economists reported that by their estimate that if the latest trade tariffs announced by President Trump are sustained they could bring about a reduction in its forecasts for the S&P 500’s earnings by roughly 2% to 3%.
Sounds pretty dire and realistic, no?
No.
The critical words here are “if sustained.” Until the latest White House confirmed that tariffs on Mexican, Canadian, and Chinese exports into the United States would be raised starting tomorrow, Wall Street continued to believe that Trump wasn’t serious and that the tariffs were merely a negotiating ploy.
Now that the tariffs are scheduled to actually go into effect, the Wall Street position has shifted to “but they won’t last very long.” Goldman’s economists said, for example, there is a substantial probability that the tariffs against Canada and Mexico would be temporary.
I think that seriously underestimates the Trump Administration’s commitment to reordering a global trading system that Trump believes plays the United States for a sucker.
The next step, I believe, will be the announcement of higher tariffs on imports from the European Union.
In a call with reporters Sunday night Trump reiterated a warning to the European Union that tariffs “will definitely happen.” Trump said of the EU: “They don’t take our cars, they don’t take our farm products. They take almost nothing, and we take everything, and then millions of cars, tremendous amounts of food and farm products.” (The most recent data I could find says that the U.S. exported goods and services worth $592 billion to the EU in 2022, and imported goods and services valued at $723 billion from the EU.)
When Trump announces those tariffs on the EU, I expect Wall Street and the stock market to increase estimates of the cost of this trade war yet again.
