On the day of the U.S. presidential inauguration, a prominent tech CEO in the U.S. shared his perspective, noting that while he anticipated potential retaliatory tariffs, he believed that any ensuing trade war would eventually subside.
“Trump reacts to the Dow Jones’ performance,” he remarked, referencing what the markets refer to as the “Trump put”.
This indicates that whenever a White House announcement negatively impacted market sentiment, the president would reconsider his stance upon observing a decline in the stock market.
However, these assumptions have shifted following the president’s recent TV interview, during which he minimized the extent to which market fluctuations influenced him.
Just a day after U.S. stock markets plummeted due to concerns over the effects of Trump’s policies, the president opted to increase tariffs on Canadian steel and aluminum, citing elevated electricity costs for Canada, approximately $100 per bill, affecting states like New York, Minnesota, and Michigan.
On Monday, Ontario’s Premier Doug Ford announced a 25% surcharge on electricity destined for the U.S. and warned of a complete supply shutdown.
President Trump stated that he is focused on rebuilding wealth for decades, if not a century ahead, which cannot simply be assessed through the quarterly outcomes of America’s major corporations.
In conjunction with remarks from Treasury Secretary Scott Bessent, the White House signaled to the markets that the president is now prepared to endure some short-term economic and market hardships. This has altered the general outlook.
Additionally, there are two other factors to consider. There is evidence indicating a potential downturn in U.S. economic sentiment, raising concerns about a possible recession.
Recent real-time analysis from the Atlanta branch of the U.S. Federal Reserve anticipates a decline in the U.S. economy during the first quarter of the year.
While government cuts may contribute to this forecast, private sector sentiment has also taken a hit, particularly due to the ongoing uncertainty surrounding tariffs.
Most importantly, the prevailing uncertainty could be devastating. Policies shift regularly, and previously stated decisions can be backtracked.
Major U.S. government departments often lack clarity regarding the administration’s direction.
Moreover, the prospect of an upcoming election in Canada offers little motivation for compromise.
In fact, what room for compromise exists when Trump has indicated a desire to leverage economic pressure to turn Canada into his “51st State”?
The trajectory suggests that the trade war will escalate in both intensity and scope.
New trade barriers against the European Union could be introduced in three weeks based on principles of “reciprocity”.
As other countries observe signs of renewed inflation in the U.S., they may be inclined to exacerbate it, making U.S. consumers acutely aware of their government’s decisions.
Recent weeks have highlighted that President Trump is serious about implementing tariffs, even against allied nations, resulting in significant applications.
Key trading partners have responded in kind and possess incentives to escalate their responses. Additionally, the White House seems intent on conveying that it can tolerate considerable short-term economic and market disruptions.
All attention is directed towards April 2, when announcements concerning “reciprocal tariffs” are expected, and for the moment, these tensions show no signs of subsiding, pausing, or reaching a truce.
