Trump's Tariff Masterplan...

...And how it will backfire

He should hire some consultant to make him pretty slides. Source: CNN

Here we are. The markets entered bear territory just two day after the announcement of massive tariffs on practically the whole world. The announcement was simply shocking. Most of us knew what Trump’s plan was:

1. Place tariffs to encourage manufacturing move to the US - create international demand for Made in America.

2. Induce gradual move from equities into bonds through tariffs - downward pressure on stocks.

3. Make Powell drop interest rates.

4. Refinance $7 trillion in debt on long-term paper with low interest rates.

5. Keep rates low and start QE + lower tariffs + subsidies on eg. oil & gas industry + general manufacturing to pump stocks once again.

Napkin plan, easy and straightforward. But not really. High-level it can work, but it needs to be carefully managed and aligned between the Executive Branch and the Fed. What happened was quite the contrary. Even the biggest Trump bulls were shocked and now are coping on X. With nothing left to say they resorted to telling us to “trust the process” and even to pointing out that mostly the rich hold stocks (sic!).

It’s not about the stock market. What we are seeing now is just investment managers pricing in the increased trade risk. What can ultimately happen is much worse and the stock market is just the canary in the coal mine.

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Intro

Today’s article is going to be on the long side. I will cover the whole situation:

1. Tariffs and how they impact the global economy in the short and long-term.

2. Will Trump double down or cave in? How can deals be made?

3. Is 10Y yield really going down enough for Trump to refinance on the long dated paper?

4. Ripple effect ie. what will happen next.

5. Can you move manufacturing to US in a year?

6. Where are we heading?

7. What will happen on prediction markets?

Take the free trial if you don’t subscribe. It’s the longest and probably the most consequential article of the year. Costs you literally nothing.