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Hypothetically speaking, what if President Trump paused his tariff rollout?
For a brief moment Monday morning, the market considered the idea in real-time. Stocks shot up several percentage points on speculation that Trump was considering a 90-day deferral. The administration clarified that no such delay would take place, swiftly ending the bounce-back.
Read more: The latest news and updates on Trump’s tariffs
Leading up to that fleeting drama, market observers were grasping for Congress, business leaders, the Fed, or even the White House to step in and ease the tariff turmoil. As it happens, the stock market manufactured a solution of its own, except it wasn’t real. But it was still revealing. Call it the tariff reprieve that wasn’t.
The idea highlighted in the wishful thinking-turned-market action is that there’s no secret as to what’s needed for a turnaround.
“Only a change, even if a modest one, in US tariff/trade policy will stabilize equity prices,” DataTrek’s Nicholas Colas wrote on Monday.
“Until there is an explicit catalyst to show markets the worst-case scenario (last Wednesday’s announcement) is off the table, stocks will continue to be volatile (at best) or decline (at worst),” he added.
Even as a flabbergasted, flat-footed Wall Street was slow to realize that Trump was serious about tariffs all along, the market is signaling that the way out of the volatility is some kind of tariff détente.
But that’s easier said than done.
Investors are well aware that economic forecasts are filled with caveats and hedging. If some monetary or fiscal policy kicks in, we can expect a certain outcome, or a range of outcomes, given an array of factors that steer where the numbers land. But what makes this moment so unnerving is how un-forecastable the future seems. Notes to investors this week, with shrinking growth estimates and S&P year-end levels, are filled with “ifs” and alternate timelines.
At close: April 7 at 4:53:51 PM EDT
If the reciprocal tariffs last for some period, we might expect a range of consequences, but stretch the time scale a little longer and the results can change drastically.
“With so many variables in play, any bold predictions around rate cuts or trade tensions should be treated with caution,” said Mark Hackett, chief market strategist at Nationwide.
That seems like a prudent way to think about all of this. If no one can see the future, then contingency planning sounds like a reasonable alternative. Because even when a solution presents itself — a misconstrued policy breakthrough leading to a momentary rally — the answer might be plain to see but nonetheless unattainable.
