Trump’s tariff gamble likely to do irreversible damage: Analyst

The Trump administration’s tariff agenda is sinking the US into a hole so deep they may not be able to climb out, warns financial markets commentator Nigel Green, with the effects of the US’s bellicose trade policies being baked into the global economy.  

“The damage has already been done,” fears Green, CEO of global financial consultancy deVere Group, as Trump’s “aggressive levies” – imposed on long-standing trading partners and traditional allies– reverberate across the global economy and shatter investors’ confidence.

“Market waves of uncertainty have taken their toll, investor confidence has been battered, and businesses are scrambling to mitigate costs they never asked for,” Green wrote in a recent commentary piece.

“Markets are on edge”, he says, with investors rattled by the “mixed signals, erratic policy shifts, and contradictory statements” from the Trump administration.

The benchmark S&P500 index – once trumpeted as a barometer of 47th President’s success – is down more than 10% from its peak on 19 February and “nearing correction territory”, with significant losses across the technology (-12.1% in the year to date), consumer discretionary (-15.6% YTD) and communication services (-5.35% YTD) sectors.

The mercurial nature of the Trump agenda, rather than the tariffs themselves, is ultimately what is unsettling markets.

Every asset class is feeling the ripple effects, Green said, with market volatility impacting everything from emerging markets and commodities to currency markets.

Investors, deVere writes, are on tenterhooks as trade tensions “spill into broader economic concerns, from consumer confidence to corporate earnings”.

Green adds: “He [Trump] insists tariffs will force better deals, but investors see only escalating costs, rattled supply chains, and a world moving on without the US. Every delay, every policy reversal, every sudden tariff hike sends another shock through an already-fragile system.

“This is beyond frustrating for investors. Markets don’t just react to actions; they react to credibility. And right now, credibility is in short supply.

“His tariff-driven economic gamble is pushing the US into a hole so deep that even America may not be able to climb out,” Green said.

Self-inflicted pain

Trump’s tariff agenda is fuelled by a supposition that the US is being dealt a bad hand by upholding trade deficits – that is, where importation of goods exceeds a country’s exports. While not the only stated motivation for the tariff blitz (with the White House also citing concerns around border control), Trump’s policy team regards the levies as effective tools to rebalance these deficits.

This has resulted in the imposition of “aggressive levies” on Mexico and Canada (currently at 25% of all imported goods) earlier this month, with China slapped with an additional 10% on top of an earlier 10% impost on all goods.

The European Union has not been spared, with Trump imposing a 25% duty on aluminium and steel imports from the bloc, a duty later also imposed on Australia. While Australia has withheld from responding – for now – the EU has moved to impose a 25% retaliatory levy on US whiskey imports. This tit for tat has seen Trump now threatening a 200% tax on wine and other alcoholic products from Europe.

For Green, the damage is done. Even if Trump were to reverse course tomorrow, its credibility as a reliable trading partner has been shattered.

“Businesses don’t operate on political cycles, they plan years ahead. The unpredictability of US trade policy under Trump has forced corporations to prepare for a future where the country is no longer a reliable trading partner.

“Some of those changes will be permanent.”

American companies have already absorbed higher input costs, with consumers already feeling price hikes passed down the chain.

Self-imposed isolation

The Trump administration’s disruptive and erratic policy pronouncements are realigning trade flows, pushing the US outside the traditional trading universe, the deVere CEO warns.

Imports from China – the US’s largest trading partner on a single country basis – have already fallen sharply since the first round of tariffs, Green notes. While US policymakers reasoned that this would bring production back to the US, goods producers are instead shifting to other low-cost alternatives like Vietnam, India, and Mexico or those who can offer greater stability.

“While the US plays political games with tariffs, other nations are striking deals, forging alliances, and creating new economic frameworks that don’t depend on Washington,” Green said.

“Europe and Asia are strengthening ties. The UK is redefining its post-Brexit trade strategy. China is cementing its position as a dominant economic force despite US efforts to curb its influence.”

Even the US dollar, “long considered the ultimate safe-haven asset”, is beginning to show signs of unease, deVere writes. Many have even questioned whether it will remain the world’s default reserve currency – a considerable blow to the US’s perceived economic supremacy.

“A weaker dollar might have its advantages for some sectors, but in this case, it’s not happening under controlled circumstances; it’s happening because global investors are questioning where US policy is heading next,” Green said.

Green concludes: “Global trade flows are adapting to a world with the US becoming no longer the dominant player it once was.”