Tariff chaos – could this be Trump’s undoing?

In recent history, there have been few global leaders that have managed to wreak such havoc on the global economy in a single swoop as Trump. Like Elon’s “chain-sawing” of US Government agencies, Trump has gone full demolition derby on tariffs, ripping apart years of carefully negotiated agreements and decimating trading and political relationships in the process. To add fuel for the fire, the president's penchant for unpredictability has meant that the tariffs were announced, revoked, and re-announced at a moment's notice.   

The result? A bloodbath in global stock markets. Major indexes in Europe and Asia opened to a sea of red, triggering circuit breakers in some places. U.S. stock futures plummeted, wiping out trillions of dollars in market value and major IPOs around the world delayed. Shares nosedived as a backlash from Beijing triggered massive sell-offs. This rollercoaster of economic policy has created a climate of deep uncertainty that continues to send shockwaves through the global markets. Goldman’s have now raised the odds of a full-blown US recession to 45%.

Perhaps the best example of the chaos, at the time of writing on Monday afternoon, an account on X called The Kobeissi Letter sent the markets rocketing by posting a comment supposedly attributed to White House economic adviser Kevin Hassett saying that there would be “a 90-day pause on tariffs”. Only for the markets to crater again literally seconds later when it turned out to be fake news. Christopher Hale wrote on X: “The entire stock market just gained and lost more money – based on an unverified tweet – than it was worth 30 years ago.”

For better or worse, Trump’s bombastic, unpredictable and often nonsensical, communication style has been his strength. In many areas it works for him, particularly when he is rallying his base or bullying the Danes, but the financial markets, rely in large part on a base level of predictability, certainty and high-quality communication from policy makers and participants.

Could This Be His Undoing?  

The impact of communications from leaders on stock market sentiment cannot be overstated. When a leader speaks, markets listen. The tone, content, and frequency of their communications can have a profound effect on investor confidence and market stability.

The New York Times, Bloomberg and numerous other media around the world reported this morning that Trump is having a ‘Liz Truss moment’ albeit on a global scale. The parallels are compelling. A highly suspect and logic defying economic policy that is disastrously communicated. Even if you were prepared to engage in some mental gymnastics and buy into the logic of the tariffs, the perception that they are a carefully considered policy move, was further undermined by the fact that he has slapped tariffs on tiny islands inhabited exclusively by penguins or US servicemen. 

To some extent, in the TV show that is US politics at the moment, none of this matters for him, the constant back and forth on tariffs and further posturing is all about the spectacle, it’s a reality TV show and tariffs chaos means global ratings and that’s what he and the MAGA base thrives on. If you don’t believe me, look no further than Trump’s political appointees, from the WWE executive in charge of education to the Fox News presenter that is now the Defence Secretary to name a few. 

But for all its supposed entertainment value, the Trump administration's tariffs will have far reaching economic consequences both in the US and on the rest of the world. Everyone from billionaires to working stiffs rely on healthy financial markets for their future prosperity. Maybe he will learn some lessons about how to communicate with the markets better in the future, maybe he won’t - either way I doubt he much cares: “I discovered, for the first time but not the last, that politicians don’t care too much what things cost. It’s not their money.” - Donald J. Trump, Trump: The Art of the Deal

So is this the moment it all starts to unravel for Trump, probably not, but to quote the famous Hollywood aphorism: “nobody knows anything”.