What the Market Is Missing About Trump’s Tariff Negotiations

By Jacob Weindling | April 4, 2025 | 11:17am

Photo by Spencer Platt/Getty Images

Economy Trade War

What the Market Is Missing About Trump’s Tariff Negotiations

The market is clearly talking itself into some level of cope right now, as Trump’s tariff regime rang it like a bell as soon as he announced the most restrictive economic policy in the U.S. since the early 1900s. I watched CNBC yesterday to see how major investors were reacting, and even though the network is the butt of many jokes for good reason, it was the kind of big news day that cable news was created for and it brought lots of good insight from lots of people managing lots of money.

That said, there was a common undercurrent in every segment yesterday: denial.

Most Popular

The market is in such deep denial and so desperate to justify its wrongheaded assumptions that everything will be OK that it floated up a bit this morning right after the vastly uncredible Charles Gasparino “reported” that Secretary of the Treasury Scott Bessent “is trying to moderate–albeit quietly–the president’s hard line stance on trade.”

Yes, Trump is negotiating with other countries even if the White House talking points say he is not. These tariffs were always designed to get countries and companies to negotiate carve-outs with gifts to dear leader, but as the Wall Street Journal reported, Trump’s team was considering two tariff options up to the last moment, a so-called retaliatory option and another universal tariff. He wound up going with both, further showing his hand.

He doesn’t want to give these up. You are out of your mind if you think he is willing to negotiate them down to zero. Even if you accept the market’s assertion that these literally insanely aggressive tariffs are put in place as a starting point for negotiations, it means that the number where he would agree to reduce the tariff is higher too. This is not going down to zero. No one starts at 54 percent tariffs on China so they can ultimately agree to none.

Plus, negotiation does not equal agreement. You can enter into negotiations and then decide that person is making an unreasonable offer, and if you find a better one elsewhere, you can tell them to go fuck themselves. America is not the center of the universe. Our main economic power is our purchasing power, but we cannot force the world to buy from us when we do not make enough things for the world to buy, and every year our leverage as the world’s preeminent purchasers erodes. By 2040, half of global GDP is expected to be generated on the Asian continent as well as 40 percent of consumption. Trump can play hardball all he wants and pretend that it’s still 1955, but it won’t change his fundamental negotiating position in our shared reality. Not to mention, just because we “bring manufacturing back” like Trump wants to does not mean we can manufacture products at a competitive price with other countries.

What happens if Trump overplays his hand and negotiators for China, the European Union, Canada and Mexico just walk away from the table? What happens then?

What happens if Trump does drop his demands, but only after Europe and China and Canada and Mexico have established new trade agreements and lessen their need for us to buy their stuff? Wall Street right now is talking themselves into the positive side of the negotiating table being an inevitable outcome, but Trump is a bull in a China shop with less leverage than he thinks he has. There is serious, and permanent, economic downside to Trump alienating core aspects of U.S. trade forever.

What happens if other countries and investors decide that Trump’s litany of lies present too much uncertainty on their own and back out of U.S. markets because they don’t think they can prepare for the future in all this chaos? What happens if Trump is successful in his attempt to bend the Fed to his will and end its extremely valuable image of political independence? Above all else, businesses need certainty, and Trump is providing them with the opposite.

2) Trump has had the same impact on economic uncertainty as a global pandemic.

[image or embed]

— John Burn-Murdoch (@jburnmurdoch.ft.com) April 4, 2025 at 6:51 AM

Investors who think everything will be alright because Trump is negotiating are buying into a self-serving narrative. The U.S. does have leverage, and it is likely to bear some fruit, but do you think a man who put a 54 percent tariff on China is looking for reasonable outcomes?

I used a nuclear explosion as my photo for yesterday’s article on this entire shitshow that Trump has brought to the frontlines of our bank accounts to demonstrate how big this is. Regime change isn’t just for despots, it’s also an economic description of when the fundamentals of a market shift, and adding across-the-board tariffs has fundamentally altered our markets for good. There is no going back to the 2023 economy. The stock market gapping down two days in a row is proof of how the ground has shifted beneath everyone’s feet and the market is readjusting its expectations as a result.

So much of Wall Street right now seems to be clinging on to the fantasy that deviating from up only Joe to down only Donald will get the market back on the 2023 trendline, and the big rally after the election was the market talking itself into this belief, despite the smartest money in the world telling everyone since September that the market is hopped up on hopium. Most of this year’s stock market decline ahead of Trump’s tariffs was just erasing the post-election sugar high as it came around to understanding the point the bond market had long been making. We are only now beginning to probe the areas of the market where pain really exists.

This will get worse before it gets better, the Tariff Man has promised as such. Many on the Street are clinging on to Trump’s quote from Air Force One that if countries give him “something phenomenal” he can come to a deal with them over his tariffs. But given the staggeringly idiotic way his tariffs were calculated, it seems like that would align with getting rid of our trade deficits, which is another issue entirely. It’s also not something that’s feasible. This is an intractable problem where Trump looks at trade deficits as inherently bad, and there is no amount of economic soothsaying that can change the fact that Trump’s view on trade is diametrically opposite from the market’s.

Really remarkable how Wall Street keeps defaulting back to ‘he can’t really be serious, it can’t just be Tariff Man Wants Tariffs’ — www.washingtonpost.com/business/202…

[image or embed]

— City Nolan (@ndhapple.bsky.social) April 3, 2025 at 2:00 PM

This is not going away. And it’s not going to be solved quickly. Trump likes tariffs for the pressure he can put on people with them, and he’s not going to give them up if they prove to be effective in getting what he wants. This is the world now. If you are a financial consultant planning for a future with zero tariffs, you are abandoning your fiduciary duty to talk yourself into a fairy tale that is incredibly unlikely to exist so long as Trump is in charge. We now live in a world with a vastly more isolated United States and with higher taxes on everything being passed down to Americans. As David Dayen of The American Prospect wrote, these really aren’t tariffs, they’re more like sanctions, and the rest of the world is treating them as such by pivoting away from us forever. The only question now is how much business this will lose the United States. Anyone on Wall Street who thinks otherwise is probably about to lose a bunch of money themselves.