The fluctuations in the U.S. stock market have garnered significant attention lately. Investors ranging from Wall Street veterans to enthusiastic Millennials have been affected by the rapid shifts in the market. Keeping pace with President Trump’s seemingly improvised approach to tariffs is proving challenging for everyone.
On March 21, Trump addressed reporters from the Oval Office to clarify his tariff strategy. He indicated his willingness to adapt tariffs in ways that benefit American companies. Trump remarked:
“I gave the American car companies a break, because it would have been unfair if I didn’t, and everybody said, ‘Oh, he changed his mind on tariffs.’ I didn’t change my mind. I helped our sort of Big Three, Big Four [automakers].”
“Instead of taking it properly, they said, ‘Oh, he changed.’ I don’t change. But the word flexibility is an important word. Sometimes it’s flexibility, so there’ll be flexibility, but basically it’s reciprocal.”
So, what does this all signify?
Perhaps Trump’s upcoming announcement of import tariffs on April 2, which he has dubbed “Liberation Day,” will shed some light on his approach. However, there’s skepticism about the clarity it may provide. The tariffs scheduled for release on this day are likely merely a starting point for negotiations and discussions.
In Trump’s framework, everything appears to be open to negotiation. We can expect adjustments, concessions, and exceptions, depending on how he perceives the need at any given moment.
This means that Trump’s tariff policies will likely continue to be unpredictable. As the costs of imports—and thus exports—are altered through political maneuvering, businesses will find it increasingly difficult to plan, budget, and invest for the upcoming quarters and years.
Rigorous Flexibility
In 2009, registered dietitian Dawn Jackson Blatner introduced a concept that resonated widely. Her book, The Flexitarian Diet, made a compelling argument: you can embody both vegetarianism and carnivorous tendencies. Thus, the term “flex” was born.
In the Book of Romans, Chapter 14, Verses 2 and 3, the Apostle Paul states:
“One person’s faith allows them to eat anything, but another, whose faith is weak, eats only vegetables. The one who eats everything must not treat with contempt the one who does not, and the one who does not eat everything must not judge the one who does, for God has accepted them.”
At Economic Prism, we respect all dietary preferences—be it vegetarianism, meat-eating, or even flexitarianism. Yet, we question the necessity of this classification.
It seems that most individuals operate as omnivores, enjoying both vegetables and meat. So, what purpose does the “flexitarian” label serve? Does participating in Meatless Mondays really redefine your diet?
As noted by Healthline, “The Flexitarian Diet has no clear-cut rules or recommended amounts of calories or macronutrients. In fact, it’s more of a lifestyle than a diet.”
A lifestyle without strict guidelines, allowing you to indulge while maintaining balance, fits well with contemporary norms. By 2025, concepts like California sober—which entails using marijuana without other substances—will be regarded favorably.
Much like flexitarians, Trump appears to be after a kind of rigorous flexibility. He aims to maximize options while seeking benefits without incurring risks.
Are you curious about how this will unfold?
Bold Claims
On March 13, the S&P 500 index hit a temporary low of 5,521, declining over 10 percent from its peak of 6,144 on February 19.
Since that date, the index has rebounded by 3 percent. The implications of this short-term downturn and subsequent recovery remain unclear. Perhaps Trump’s flexible tariff strategy will lead to a significant stock market boom—stranger things have occurred.
Alternatively, we may face a significant market correction. If so, what might this entail?
Could it be a swift downturn similar to early 2020, when the S&P 500 plummeted 30 percent only to quickly recover? Or are we on the cusp of a protracted bear market that could devastate portfolios and investment funds?
Given the S&P 500’s inflated valuations and the chaotic nature of Trump’s tariff policies, we suspect a severe bear market is on the horizon. Investor confidence appears to be dwindling.
This past Monday, it seemed Wall Street was optimistic about the flexibility Trump highlighted in his recent remarks. The S&P 500 surged 100 points, only to see that gain dissipate by Thursday.
Amidst this volatility was Trump’s announcement of 25 percent tariffs on foreign-made automobiles and select auto parts, set to take effect on Liberation Day, April 2. This announcement came alongside existing tariffs. Trump boldly proclaimed: “This will continue to spur growth that you’ve never seen before.”
Do you buy that claim?
Trump Tariffs Gone Wild
The White House estimates that these automobile tariffs will generate $100 billion in annual revenue. However, this figure does not account for the financial burden shifted onto American consumers, who will be shouldering the costs to support the domestic auto industry.
Moreover, these tariffs overlook a critical aspect of trade. In 2024, the U.S. exported $3.19 trillion in goods and services. By imposing tariffs on imports, American trading partners will have less capacity to purchase U.S. exports.
Thus, any jobs created within the American auto industry through protective measures will likely retract from job opportunities in other U.S. sectors that produce and export goods. Effectively, these tariff policies elevate inefficient American businesses while disadvantaging more competitive ones.
In Chapter 11 of his acclaimed book Economics in One Lesson, economist and author Henry Hazlitt expressed the following:
“The effect of a tariff, therefore, is to change the structure of American production. It changes the number of occupations, the kind of occupations, and the relative size of one industry as compared with another. It makes the industries in which we are comparatively inefficient larger, and the industries in which we are comparatively efficient smaller. Its net effect, therefore, is to reduce American efficiency, as well as to reduce efficiency in countries with which we would otherwise have traded more largely.”
Ultimately, Trump’s tariffs, while intending to bolster certain industries, will likely backfire and harm the economy overall. In the long run, reduced efficiency due to these trade barriers could negatively impact real wages and wealth for Americans.
Additionally, these tariffs serve as a serious distraction from more pressing issues, such as the federal government’s spending and debt challenges.
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Sincerely,
MN Gordon
for Economic Prism
