The headlines are hailing and cheering lower petrol prices for motorists across the Easter and Anzac holiday weekends, but these are celebrations for a lesser achievement than what lower fuel slugs mean for a bigger picture.

More significantly, Trump’s tariffs have created a probable scenario that means lower petrol prices means lower inflation, and that means more chances of interest rate cuts!

In turn, that boosts confidence (both consumer and business), works against recession threats and is a big plus for stocks, as well as our super. So, this is a positive spin-off from the excessiveness of the Trump tariffs. Now we have to hope that the following happens to help this positive picture materialise:

1. Trump must avoid any crazy decisions that spook both stock and bond markets.
2. Gradually tariff deals between the US and trading partners show up.
3. The market believes trade deals, especially one with China, become possible.
4. The Federal Reserve and other central banks read the economic tea leaves and move quickly enough to avoid a significant slowdown because of tariff uncertainty.

Behind this expected sustained fall in petrol prices is the tariff turmoil and the fears that a trade war will lead to a global recession and a reduced demand for energy.

The SMH’s Nick Toscano aptly explained what we’re seeing with this: “The cost of crude oil, which is refined into petrol and diesel, has tumbled nearly 15 per cent in two weeks to levels not seen since 2020-21 when COVID-19 shutdowns confined billions of people to their homes and wiped out fuel usage globally.”

The national average price of unleaded petrol has tumbled to $1.79 a litre but who can’t remember seeing prices topping $2 in recent times? Helping KO high prices has been the surprise increase in supply from OPEC+ that has brought Brent crude down from $US75 or $119 a barrel to $US65 or $103 over May.

It looks like our oil producing buddies don’t want to cook their global customers as Trump and his team threaten tough economic actions to get their way. Fortunately for the world, the bond market effectively said to the US President that enough is enough, or as Robert De Nero might say in a Martin Scorsese film: “If you’re gonna mess with me, well, I’m goin’ mess with you!”

Trump moves going forward will be more measured and thought through, though his dealings with China could be brutal, and potentially could worry stock markets in particular. If Trump was more predictable, I’d be happy to invest confidently, but with stocks up two days in a row on Wall Street, I’m only cautiously believing that a positive road lies ahead for economies, stock prices and interest rates.

Overnight, US stocks went up on the back of the tariff exemptions announced for iPhones and other hi-tech products produced by US companies but in China. The more tariff concessions we see from the Trump team and the more trade deals are achieved, the more stock markets will be positive.

We’re in Trump’s hands, but we will get help from central banks via rate cuts if he overplays his hand, because they’d be more worried that his tough trade plays are increasingly likely to create a recession than the rampant inflation we saw when Covid killed global supply in 2020-21.

According to money market calculations, right now the US central bank is 74% certain to cut interest rates in June, while the likelihood of us getting a rate cut in May looks done and dusted. Only silly promises from desperate politicians between now and May 2 could cancel that cut!

 

One thing’s for sure about Anthony Albanese and Peter Dutton is that they really want the PM job, and they’re prepared to spend our money to get it!

Yep, they’ve been promising big, with serious budget deficit implications. So, who we vote for should factor in who’s more like to be able to pay for their potentially pernicious pledges.

Let’s look at these ‘promises’ by starting with Albo’s offerings:

1. Every worker gets a $1,000 standard tax deduction of work-related expenses at a cost of $2.4 billion.
2. As of 2026, all first home buyers will be able to buy a property with a 5% deposit.

Now to the Dutton giveaways:

1. A one-off tax cut for those earning up to $144,000 to be received as a one-off income tax refund, up to $1,200 for the 2025-26 tax year end. This will come at a total cost of $10 billion.
2. This Cost of Living Tax Offset is not receivable until after June 30 next year.
3. The AFR’s Phillip Coorey gave us the detail of this offset: “The new offset will provide the full rebate of $1,200 to those with annual taxable incomes between $48,000 and $104,000. Those earning below $48,000 and between $104,000 and $144,000 will receive a smaller offset.” (Low incomers and high incomes get less of an offset.)
4. There’ll be a tax deduction for mortgage repayments for first home buyers, but it will have to be on a new home.
5. And the deduction will last for five years.
6. But it will only apply to the interest on the first $650,000 of a mortgage, so it helps lower income buyers purchasing a cheaper new property.
7. It will cost the budget $1.25 billion over the first four years.

Coorey checked out the view of the people trained to understand the budget implications of these pre-election giveaways. This is what he found: “Economists roundly condemned both sides for what they called increasingly reckless spending and embracing housing measures that would do little to improve affordability.”

For the record, Treasurer Jim Chalmers’ 4th Federal Budget sees last year’s $15.8 billion surplus turn into a forecast deficit of $27.6 billion in 2024-25, and $42.1 billion for 2025-26.

To be fair, Dutton’s vote-catching giveaways will come with some offsetting savings. “The new $10 billion tax cut, as well as the $1.25 billion mortgage tax deductibility promise and the already announced $6 billion halving of fuel excise for a year, would be paid for by axing Labor’s $17 billion top-up tax cut announced in the March 25 budget,” Coorey pointed out.

So, the would-be PM is cancelling a tax cut that we haven’t got but was dangled before us last month in the pre-election Budget.

Out of all this, the big question is this: what does RBA boss Michele Bullock think about these promises and will they reduce the number of rate cuts ahead? I think the answer is yes!

As both leaders make undertakings to hopefully give them the keys to the lodge, a lot of economists would agree with former US President Ronald Reagan who once told us: “The nine most terrifying words in the English language are “I’m from the government and I’m here to help.”

 

It was an historic rally yesterday on the strength of President Donald Trump’s backdown on his reciprocal tariffs, but the economists have done their numbers, and the new figuring says his tax slugs (or tariffs) are still going to be a problem. They’re just not as bad as they looked before his 90-day pause.

On Wednesday US-time, Wall Street cheered the Trump U-turn, with the Dow Jones Industrial Average surging by 2,962.86 points, or 7.9%, which was the biggest single-day point gain ever!

The S&P 500, the broader market index, spiked a huge 9.5% — the biggest one-day gain since the end of 2008 and the tech heavy Nasdaq boomed 12.2%. But that was then. Today the Dow was off 1014 points (2.5%), the S&P 500 was down 3.46% and the Nasdaq gave up 4.31%.

So, what gives, especially when the Yanks got a good CPI for March, which was down, yep, 0.1%, the first decrease in five years, taking the inflation rate to 2.4%. The lower reading was helped by lower energy costs, used cars and airfares, as well as slower price rises for apparel, but these will change once the President’s tariffs come to town!

That thought hasn’t eluded economists, who know a 10% tariff on just about all foreign imports is going to be inflationary, while the 125% hit on the USA’s third biggest trading partner, China, is bound to add to future price levels. And don’t forget that eventually Canada and Mexico will face a tariff that will be higher than 10%, given they have been ‘awarded’ a 25% tariff, which according to current news was 25%.

Meanwhile, the EU has a 20% tariff awaiting them if they can’t cut a deal with Trump. While the EU has put themselves on a 90-day pause for their retaliatory tariffs, ultimately, they will get slugged who knows by what percentage. Also, the sector tariffs remain, which all adds up to higher US inflation. Economists have focussed on the mugging for US and global economic growth from the tariff war ahead.

In a nutshell, while stock markets cheered at the Trump U-turn, the pesky economists, who are also tagged “the dismal scientists” have come up with conclusions that stock markets digested today, which explains why stocks are down today.

Let me sum up the latest take on these Trump tariffs:

1. The tariffs will raise the price of US made products because the economy needs products from overseas, which comes in cheaper from the countries that will be tariffed.
2. 30-40% of US manufacturing relies on imported products.
3. Goldman Sachs lowered recession risk from 65% to 45%; Metlife’s recession call dropped from 75% to 60%.
4. Investment bank, Morgan Stanley lowered immediate recession risk but says the tariffs prolong uncertainty. They didn’t say it, but they also infer the President’s capacity to punish trading partners and then change his mind isn’t ideal for investing other people’s money.
5. What happens after 90 days can’t be ignored by economists and the big investors who take their forecasts and then place their bets on stocks and bonds.
6. Remember, the bond market is boring compared to the sexy stock market but as abcnews.com reported on Wednesday: “Aselloffhit the United States Treasury bonds overnight, sent bond yields soaring and triggered concern about assets that typically serve as a safe-haven investment during moments of instability for stocks…”

The Trump tariffs have escalated uncertainty, and the 90-day pause showed the President will negotiate, but the big question will be where will we be in three months’ time?

And we still could see a world heavily slugged by tariffs but simply not as much as we thought and expected at the start of this week.

CNBC’s economics commentator, Steve Leisman, looked at the average tariff rates after the U-turn and this is what he found:

• Before the Trump tariffs, the US average tariff rate was 3%.
• After the Rose Garden tariff ‘party’, this average rate went to 30%.
• After the U-turn/pause, that rate is now 25.3%, the highest since 1904.
• With no trade with China and the new tariffs after the U-turn, the average slug would be 18.1%, the highest since 1934 and the Great Depression!

The numbers can lie, exaggerate or underestimate, but economists can’t convince themselves that these Trump tariffs won’t breed higher inflation, slower economic growth and even a recession, as well as a pile of uncertainty, which is toxic for stock markets.

This is why the US market adjusted its enthusiasm overnight and some of the huge surges yesterday for stock prices were driven by short sellers who got caught unaware that the President was about to change his mind!

Bottom line? The President can be influenced to change the magnitude of tariffs, and he might eventually strike a better deal for the US and reduce the negatives around inflation and unemployment. However, the uncertainty that prevails until then will stop stock market players from over-cheering and over-buying companies.

The US President has done the greatest U-turn or pivot in the history of financial markets and American history, and the positive impact on financial markets is the biggest I’ve seen in a lifetime of reporting on money matters to the Australian public!

Love them or hate them, it was the reactions of financial markets (stocks and bonds) that has taught Donald J. Trump a powerful lesson. And God I’m glad he was smart enough to heed the market’s unignorable messaging.

In case you need to have it spelt out, Donald Trump got smart and has backed off on his huge tariffs, and stocks have surged. The Nasdaq was up over 12% and the Dow spiked nearly 8%, while our market is set to open 420 points or 5.73% higher, which is huge. The dollar has picked up to 61.40 US cents and is bound to trend higher despite this already big 3.25% gain.

While our gains will be good, our link to China could reduce the total gains, so let’s see what the

new status of tariffs is in the wild weird world of Donald Trump.

Here’s the new tariff world in a nutshell:

1. There’ll be a 90-day pause in some reciprocal tariffs.
2. All countries except China go back to a 10% baseline tariff.
3. China would now face a higher 125% tariff.
4. The pause doesn’t change sector tariffs on the likes of cars, steel, aluminium, etc.

 

So, what changed the President’s mind to create the greatest policy pivot of all time? Try these things:

1. The EU decided to start collecting tariff duties on US products as of April 15.
2. Jamie Dimon, boss of JPMorgan, went on TV (the preferred medium of Donald Trump) and said the chances of a recession had escalated.
3. The bond market vigilantes and sensible traders started pulling money out of US government bonds, which meant interest rates were on the rise. We’re talking about a potential liquidity crisis if this continued!
4. Scott Bessent, his Treasury Secretary, says “this was his strategy all along.”
5. Elon Musk calling Trump’s key trade adviser, Peter Navarro, “a moron”.
6. Bill Ackman talking about the President creating a “nuclear winter”.
7. Ordinary Americans were staggered that their ‘super’ or 401K balances were tumbling.

What does this all mean?

1. Your super balances will surge today with the stock market.
2. The recession fear is off the table.
3. China and Trump will look at making ‘a deal’ but I expect the game of chicken to see who blinks first will be the near-term big story.
4. Deals will eventually be made with most countries and those with a big trade surplus with the US will be at the negotiation table first.
5. We could be exempted from the 10% baseline tariff because we have a trade deficit with the US.
6. Steel, aluminium and beef tariffs or sector tariffs probably will remain.

The bottom line is that the collapse of the stock market would have motivated Elon Musk to bag the President’s key trade adviser, Peter Navarro. Tesla’s share price was up 22.29% overnight. And it was the bond market that would have scared the President into this prodigious policy pivot.

On his U-turn, the President said people had the “yips”, which is a golfing term when a player has anxiety, especially when it comes to putting.

Of course, no politician could explain his way out of the greatest policy mistake in 95 years for the USA, but the most important development overnight is that this tariff madness has been replaced by a more sensible approach for the US to get a better deal on trade protection.

And, hell, financial markets liked it. And today, we all get richer!

The Trump economic lunacy continued over night with a litany of headlines coming out of the White House that could have made front pages on at least three different newspapers. Let me list them:

1. Trump slams China with a 104% tariff!
2. Elon Musk ridicules Trump trade advisor Navarro!
3. US recession a 40% chance of happening!

Unsurprisingly, the Dow Jones has finished in the red, off 320 points after making a bright start to the trading day that followed our market surging yesterday 166 points or 2.27%.

However, a day is a long time in the Game of Thrones tariff drama that the former-TV-star-turned President is creating on the set of his real life show called being the US President!

Our market will be down today, with SPI Futures predicting a 136 point slide at the open!

Seriously, this is crazy stuff. It shows when even Elon Musk, a big Trump supporter, is going after the President’s number one tariff and trade adviser. Peter Navarro is the guy who was anti-Aussie and has argued for tariffs on our beef, steel and aluminium.

The AFR tells us: “Billionaire presidential adviser Elon Musk attacked White House trade counsellor Peter Navarro as ‘dumber than a sack of bricks’ (now there’s a turn of phrase!) as a fight over President Donald Trump’s tariff regime spilled on to social media on Tuesday.

He also tweeted that he is “truly a moron” (Musk has looked at Navarro close up so he’s making this call with some knowledge!) and mocked the trade adviser for in the past citing the work of “Ron Vara” — a fictional expert whose name is an anagram of his own!

This is like a script from an episode of Game Of Thrones, with Trump looking like Aerys II Targaryen, also called the Mad King and King Scab. The rats are starting to desert the ship and it’s the smartest ones who are leaving first.

Part of the reason Musk might be mad as hell could be this 104% tariff that Trump has wacked on China.

This means his Tesla cars now face a 104% price increase on the landed cost of one of his vehicles made in China and sold in the US. Apple has the same problem with its iPhones and Macs, which will become very expensive in the USA. Its share price was down 4.98% overnight and is off 24% in a month.

The share price drop of Apple since tariff talk got serious is 33% and a US$259 stock is now $172.42. The share price hasn’t had such a horror slump since the GFC!

This Trump trade war is like Cambodian Pol Pot’s killing fields where investors in the stock market and the companies they invest in are being killed BY misguided tariffs and deal-making that works OK in the corridors of corporate power of New York but not in the real world of planet earth!

Can’t you just imagine Vladimir Putin sitting back watching US TV in his armchair laughing his head off as Trump smashes the wealth of his allies, undermines their economies and destroys the common bond they have in opposing Russia’s encroachment on its neighbouring countries.

To many American voters and even global spectators Trump was a good idea in theory, in opposing the silly excesses of the extreme left-wingers of politics and society, who were imposing changes that many people opposed.

But Trump’s economics on tariffs is as immature and as flawed as the formula used to calculate the level of unfair protection the US has faced at the hands of its trading partners.

And stock markets are screaming that these Trump tariffs are as scary and threatening as the Global Financial Crisis and Covid. In both cases, government and central bank intervention was needed to prevent a market crash becoming a serious recession that turned into a Great Depression.

Trump created this mess. Only Trump can clean it up! Well, that’s not exactly true, because Congress could take away the International Emergency Economic Powers Act of 1977 (IEEPA), which he’s using by claiming there’s a national emergency “posed by the large and persistent trade deficit that is driven by the absence of reciprocity in our trade relationships and other harmful policies like currency manipulation and exorbitant value-added taxes (VAT) perpetuated by other countries.”

While a normal political leader would have dealt with this country by country, the Trump playbook calls for big publicity, aggressive bargaining and him winning. It looks like he might have bitten off more than he can chew and hopefully more influencers like Elon Musk, investor Bill Ackman and mega donor to the Republican Party and financier for the founders of The Home Depot empire, Ken Langione, who has basically looked at this tariff blow up and asked: “What the f?!”

I won’t be buying stocks until Trump gets real. And given his recalcitrant nature, Congress has to be the Game of Thrones king slayer.

This is not a political statement. It is an economic statement — Trump’s tariff tirade is madness, and I’ll answer your top 10 questions to prove that this guy is a threat to your wealth, your super, your job and your business.

So, let’s get started in answering the questions I’ve been getting since these over-the-top reciprocal tariffs were revealed on April 2.

1. Will Trump pivot and help the stock market regain its losses?

I think he will but I’m not sure how long he’ll wait. The longer he holds out, the worse it will be for stock prices and your super.

2. Will interest rates come down?

Yes, but central banks will wait to see how serious Trump is about these tariffs and whether he pivots to reduce their impact. Overnight he threatened China with a 100% tariff if they go through with their 34% tariff reaction to his reciprocal tariff. This suggests he’s not in a backdown mood, despite trillions of dollars being wiped off global stock markets.

3. How many rate cuts are expected by economists? Four this year and they’ll come quicker if Trump doesn’t change his mind on the size of the tariffs and who’s affected.
4. Should we expect a global recession?

If Trump maintains his stance on tariffs, a recession is certain. A CNBC survey over the weekend put the chances of a recession at 56%, up 33% on its previous survey!

5. Could Australia dodge a recession?

It would be highly unlikely as our growth rates aren’t high at the moment. Annual growth to December was 1.3%.

6. What would happen to unemployment? Unemployment is 4.1% and 612,000 Australians are out of work. This could go to 6% in a recession. That would mean about 900,000 people out of work, so some 300,000 Aussie could lose their jobs!
7. What will happen to our super?

Since Trump’s tariffs started to spook stock markets, our stock market is down 14%. If you’re a growth investor with $500,000 in super, Trump has cost you $70,000. If you’re a balanced investor, the loss would be closer to $45,000!

8. Should we expect another bad day for stocks? Yes, but there are fund manager and experienced investors picking up quality companies at lower prices. That said, if Trump doesn’t hose down the fire in his belly for these red hot tariffs, there could be another leg down for stocks.
9. Is anyone trying to talk sense into Trump?

Jamie Dimon, boss of JPMorgan Chase (the USA’s biggest bank) has gone public saying these tariffs will raise inflation and slow down the economy. While he was too respectful, Wall Street CEOs are scared of Trump. The Trump supporter and billionaire Bill Ackman, who endorsed Trump’s 2024 presidential bid, warned over the weekend that going ahead with the new tariffs was tantamount to launching an “economic nuclear war.” CNN reported the following: “In a post on X, Ackman said “business investment will grind to a halt, (and) consumers will close their wallets” if the new levies do indeed come into force. “We will severely damage our reputation with the rest of the world that will take years and potentially decades to rehabilitate,” he added in the post that was viewed 10.6 million times.” The world needs more intelligent leaders within America to start sticking it to Trump.

10. How can this Trump wealth destruction be stopped?

Trump needs to pivot and soften his stance on these tariffs being negotiable, with reason thrown into the equation. Also, Congress can gang up and throw the legislation that has given Trump the power to do this without approval from the elected officials of Congress.

Overnight, Wall Street tried to fight gravity. The tech-heavy Nasdaq did end up a mere 15 points. while the Dow Jones index lost 349.26 points, which is small by recent post-tariff standards. Our market is expected to open up 70 points higher! However, if we don’t see Trump give some ground on his excessive tariffs, then we could see stock prices dive again. On the flipside, if he admits he’s up for negotiation on setting reasonable tariffs, stock prices will rebound but the uncertainty this has created means we won’t see markets return to previous high levels for some time.

While Donald Trump might have some social and even political arguments that sensible people might see some merit in (such as taking on the excessive critics in the cancel culture and the left-wing politicians who specialise in creating policies that the majority see as unreasonable), the President’s economic policies are naïve, opportunistic and wealth-destroying.

This US President has tapped into the playbook of previous world despots, threatening the world with tariffs, identifying “cheating” trading partners and immigrants, as well as former presidents and public servants, as the cause of America’s economic demise, when that demise comes down to the poor competitive ability of US manufacturing and the seemingly insatiable appetite of US consumers who are said to shop til they drop.

Making his stupid tariff policies possible are gutless Wall Street CEOs, whose company share prices have been decimated as the stock market’s “what’s rational” filters are blinking that Trump’s tariffs are profit-reducers, inflation creators and job killers.

CNBC looked at the market fallout for the world’s richest this way: “Collectively, the two-day drop wiped out $30.9 billion in net worth for Elon Musk, $23.49 billion for Jeff Bezos and $27.34 billion for Mark Zuckerberg — the world’s three richest people, in that order — according to Bloomberg’s Billionaires Index”.

That’s deserved punishment for being wimps in the first place!

This group of ‘YES’ men and women are like the UK’s Prime Minister Neville Chamberlain, who came back from Germany after talking to Hitler in 1938 declaring he’d negotiated with that madman and was bringing “peace to Europe”. We all know how well that worked out!

Partly explaining the lack of intestinal fortitude from US business and political leaders is the fact that Trump showed, with his 6^th January 2021 riots from his followers, that a US civil war of card-carrying Trumpists versus normal people could eventuate if their beloved leader and his tariffs are cancelled by the sensible majority.

While many countries have overprotected some of their industries and a rational reaction to these unfair trade players is reasonable, the qualified sensible people of the world (let’s call them economists) think the Trump team’s figuring is crazy.

When the gracious and respectable chief economist of AMP, Dr Shane Oliver, looked at the calculations by Trump’s team, this was his reaction: “It’s based on a whacky formula that compares the US trade deficit with a country with its exports to the US – the bigger the gap the higher the reciprocal tariff, for example, for the European Union it is the US’s $236 billion trade deficit with the EU divided by the EU’s $606 billion in exports to the US which gives 39%, which is then halved because Trump is such a nice guy!”

Although our market is set to cop another beating today, it does look like help is on the way. But given the craziness of this elected world leader, you can’t expect the rational to ultimately win the day. The phrase ‘only in America’ was created for a reason. While you can hope, I regularly argue that “hope is not a strategy!”.

Here's what’s happening that could be positive for some development to turnaround market sentiment:

1. A group of tech and finance leaders are off to Trump’s Mar-a-Lago resort to ‘hopefully’ make him get real about his tariffs.
2. Elon Musk is set to leave the Trump team and took a shot at Harvard PhD graduate Pete Navarro, the tariff spokesperson for the President. Musk tweeted: “A PhD from Harvard is a bad thing, not a good thing”. He also asked what Navarro had ever built.
3. Even Trump has contradicted Navarro who said the tariffs were not negotiable.
4. China was right to point out that the “market has spoken” about how crazy these tariffs are.
5. Central banks are ready to cut interest rates if Trump doesn’t go to the negotiating table.
6. There’s the increasing threat of a US recession following this huge market sell-off. I can’t believe Trump wants history to refer to the Trump tariff recession, which would be far worse than Keating’s “recession we had to have”. This error-induced market meltdown could lead to a global recession that didn’t have to happen.

So, how bad could this sell-off be?

The S&P 500 is now at 5074.08. Its recent all-time high was 6144.15. So, the tariff-created slump of stocks has been 17.4%. Chartist think the market could get support at the 4850 level. The market’s peak in 2021, following its post-Covid surge, was 4850 but that historical marker might mean nothing if the Trump tariff team keep spooking world financial markets.

History suggests this doesn’t have to be the start of a scary bear market, as the Stock Trader’s Almanac doesn’t see a fully-fledged bear market coming. It notes that “corrections like the current one only morph into bears one-third of the time,” but that history emanated out of a political scene that never had someone like Donald Trump in charge!

The best take on this tariff-created market smashing came from Wharton School’s Professor Jeremy Siegel, who on CNBC declared: “I think this is the biggest policy mistake in 95 years. This is a self-inflicted wound. It’s an unforced error that did not have to happen.”

One last point! Here’s a table that compares the Trump teams calculations to those of the World Trade Organisation. Someone has either failed maths or economics. Probably both!

 

This looks like we’re seeing just another case of the use and abuse of statistics. Who would you trust? The World Trade Organisation or an entrepreneur-turned-TV star-turned US President?

As I said earlier, Trump has some supportable views at a social and political level, but it looks like he learnt his economics from a snake oil merchant from the bush!

Pray for someone with guts in the US to make him see sense because only Trump can stop Trump.

The Trump tariffs were bigger than expected and US stocks have been smashed, with the likes of Lululemon losing 11% at one stage because 90% of its products are made in Vietnam, Cambodia, Sri Lanka, Indonesia and Bangladesh. And Vietnam, which produces 40% of the athleisure companies products was hit with a 46% tariff!

The question we have to ask ourselves is whether this current stock market correction, which means the market is down 10% plus, will turn into a crash? This would mean a 20% or more fall in stock prices, which tends to bring a recession, a big jump in unemployment and much lower interest rates.

My view is that Trump will U-turn on some of his big tariffs and the market will rebound. The problem is that my success on guessing where stock markets go was built on US and EU political leaders being largely rational, internationally co-operative and not willing to spook stock markets like one Donald J. Trump. When it comes to investing for my clients, my subscribers and myself, this guy is not my kind of guy, making him impossible to read with confidence. This is why markets are tanking today.

The Trump presidency has brought with it an economic naivety, which has been dressed up as a nationalistic get-even with those countries that imposed tariffs on US producers. It was seen as a way to create jobs in the USA and collect tariff revenue from foreign exporters that would bankroll lower taxes.

It was a neat little plan that confounded sensible economists, who’d learnt that the freer the trade between countries, the better off countries would be. But this didn’t make sense to those who wanted to vote for someone like Donald Trump, who didn’t realise that while American blue-collar workers have lost out in a modern world, their fellow Americans in white collar businesses (i.e. banking, credit cards, computing, AI, the internet, streaming services, movie making and so on) dominate the world!

This also brings a lot of US exploitation of consumers and businesses that we’ve been powerless to stop to any large degree.

But what has confounded me has been the gutlessness of US chief executives and boards to tell the President that his tariffs are way over-the-top, and that the world wouldn’t cop it. So, what we’re seeing now is the stock market, along with its most influential players (i.e. big global fund managers, significant investors, super and pension fund managers and others) telling Donald Trump that his tariff plan is crazy!

Of course, the CEOs of Wall Street knew the Trump tariffs weren’t based on sensible economics, but no one had the intestinal fortitude to stick it to the President by giving him the truth because he’s clearly a vindictive guy. It’s been like an “Emperor’s got no clothes” situation and the collective selling actions of the market is screaming it out loud!

At the close, the Dow was down 1679 points or 3.98%, while the NASDAQ lost nearly 6%. That’s a blood bath.

Our market lost only 0.94% yesterday but it’s going to be ‘ugly’ today. It will be pretty bad until Trump backs off on these mad tariffs, which usually informed players have argued are only the starting points of bargaining.

Carlos M. Gutierrez, former Commerce Secretary to George Bush and a one-time CEO of Kellog’s, told CNBC that he thought most of these tariffs would be “gone in six months”, meaning that the Trump team would eventually negotiate with the countries in question and deals would be struck.
For example, he told CNBC that he sees the 10% German tariff on US cars easily reduced to the 2.5% tariff that the Americans hit German cars with. He foresees a big trade deal with China, which is now facing an in-total 54% slug on its exportable products.

Did I say this is Trump tariff madness?

However, this President will be brought to his senses by this Wall Street reaction, but it could take some time given the nature of Donald J. Trump.

At the core of this big sell-off has been the surprise of the size of his “kind reciprocal tariffs”, as he called them, because they were often half of what US products have been taxed by these countries.

“If he would have come in with just the 10%, I think the markets would probably be up quite a bit right now,” said Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report. “But because the tariffs came in bigger than many expected, I think what that does is it creates more downside volatility right now.”

These bigger tariffs with the major players (i.e. the EU, China, Japan and so on) are ambit claims or nasty bargaining chips that Trump has thrown at many countries, which will hopefully be reduced, and this will help bring back higher share prices.

One of the best market callers is Tom Lee of Fundstrat and this is how markets.businessinsider.com reported his views on this sell-off: “Tom Lee isn’t backing down. As markets wobble under tariff drama and recession fears, one of Wall Street’s most unapologetic bulls says investors need to hang tight—because President Trump wants stocks to rally. That’s the call Lee’s making, and he’s sticking to it.”

Lee says Trump does not want Wall Street to give him a thumbs down. He does not want a recession, and he has a lot of skin in the game, including bitcoin, which today is A$129,000 after being $169,000 at the beginning of February — that’s a 23% fall!

While I largely agree with Lee, the next challenge for share prices will be the reaction of the USA’s trading partners, who today must feel more like trading enemies rather than partners.

That’s what Donald Trump has brought to the international table. We can only hope it doesn’t end up being a long trade war or else the world will rue the day that a majority of voting Americans thought Trump as the 45^th President of the USA was a good idea.

If the former Commerce Secretary is right that these tariffs will be largely gone in six months, we will see a big rebound in stocks. And I think as Trump pulls off trade deals, which he needs to do, stocks will make a comeback.

We have to keep calm, knowing that a guy like Trump, with a big ego, couldn’t stand the stock market to crash and the economy to go into a recession on his watch. I expect Trump will act to make sure that this market correction doesn’t turn into a crash, but he won’t want to wait too long.

After listening to President Trump ramble on and outline the guts of his tariffs, I’m confused how I should play stocks. The market indices and share prices of big US stocks are on the slide but out SPI futures tell us that our market will open up 41 points higher at the start.

What do these early reaction signs mean? Here’s my best guess — the Trump tariffs aren’t as bad as they could have been for Australia. However, there is a second part to this Trump tariff tale and that will be the reaction of other countries to these US taxes on their exports.

Here are some of the big points President Trump led with in his speech from the Rose Garden in the White House:

1. Trump told us: “They do it to us, so we will do it to them.”
2. 100,000 manufacturing jobs were lost in Biden’s term last year.
3. “It’s our turn to prosper to reduce taxes and reduce our debt.’
4. “Factories will come into the USA…it will be a Golden Age of America.”
5. Non-monetary protection barriers of trading partners have been considered.
6. There will be a 25% on all overseas cars sold in the USA.
7. Canada dairy farmers have been overprotected.
8. Australians are lovely people “… but Australia bans US beef! We’re doing the same thing tonight!”
9. There’s a minimum baseline tariff of 10% on all countries exports into the USA.
10. We weren’t signalled out, so it looks like we’ll cop a 10% tariff on our exports.
11. Switzerland will have a 31% tariff.
12. Vietnam 46%; Cambodia 49%; South Africa 30%; Indonesia 32%; India 20%; 25% South Korea; Taiwan 32%.
13. The EU will see a 20% tariff, China 34% and the UK 10%.

As the President spoke, this was what after-hours market indicators were telling us:

1. SPDR Dow ETF down 0.91%.
2. SPDR S&P 500 down 2.18%.
3. Apple was off 4.72%.
4. Nvidia slid 3.47%.
5. Oracle lost 2.86%.

This suggests the US market will find it hard to rise tomorrow and we’re bound to await the reactions of other countries. These aren’t likely to produce good headlines for stocks.

That said, President Trump has labelled his trade slugs as “kind reciprocal” because he has only hit his trading partners with tariffs that are only half of what they have imposed on US producers.

It’s possible the market has been expecting more aggressive tariffs, but I don’t think we’ll really know if this is the case until we see how Wall Street behaves tomorrow.

Undoubtedly, market smarties will be looking at individual companies and how they’ll be negatively or positively affected by these tariffs, which will lead to buying and selling accordingly.

From our point of view, if 10% is our slug, that’s not huge. I’m sure our beef producers will find other buyers who’ll be happy to reduce their trade with Donald Trump’s America, which is allegedly on the ‘Golden Age’ comeback trail.

To keep Americans happy, the President said these tariff collections will bankroll big tax cuts and Wall Street will like the sound of that.

The only big question mark for me will be how aggressive the tariff responses of those countries that have been hit harder than 10% will be.

 

PS: Remember Donald Trump is a deal maker and there is an expectation that many of the countries slugged by these tariffs could do a deal to reduce their tariffs. Their reward would be lower US tariffs and this would be good for stocks over the course of this year.