The Shocking Truth Behind Trump's Tariff Tactics

(You Won't Believe #3)

The Trump administration’s “ready, fire, aim” approach to foreign trade policy and tariffs looks like it’s just going to make for added market volatility without much benefit. Even in just the time since he was inaugurated, tariffs have gone from “day one” to the beginning of February to being implemented for one day before being postponed until March. As I write this, the tariffs on Chinese goods are still in effect, but it’s reasonable to think that those could also be rolled back at any time. The point is that it seems like a fruitless effort to try to trade on what we think trade policy will be or the inflationary/deflationary effects that could come as a result of it. There’s just too much changing too often. In the first Trump term, tariff threats came and went regularly with relatively little ultimately getting taxed. It feels like we’re headed for a repeat now.

For as much turmoil as it caused for a little while last week, it seems like the DeepSeek drama has largely fizzled out. After a handful of mag 7 earnings reports, the belief seems to be that DeepSeek could cause a resetting of what’s possible with AI development under certain component and/or budgetary restraints, but ultimately won’t result in a major shift of big tech’s plans or spending. The confirmation may have come from Facebook’s quarterly earnings, where it announced an increase in 2025 expected capex spending, but saw the stock still rise significantly. That isn’t all due to AI, of course, but it does demonstrate that the markets are still willing to reward big tech companies with heavy spending plans.

From what we’ve seen so far, the tariff saga has resulted in some significant shifting within U.S. equities, but not necessarily triggering a move from stocks to bonds. Long-term Treasuries have seen some benefit in this situation, but the 10-year yield is still roughly in the same spot as it was more than a week ago. During DeepSeek, we saw a big rotation out of growth, tech & high beta and into staples, healthcare, low vol and value. Following the Trump tariff announcement over the weekend, we saw a lot more traditional risk-off behavior - Treasuries, gold & utilities leading. This could be a big reason why all four of the risk signals are still pointing to risk-on at the moment. Investors still haven’t been rotating from stocks to bonds, just within stocks themselves. With the backdrop of a still healthy U.S. economy and absent a major risk-off catalyst at the moment, we could see more of this rotation within equities based on the policy shift of the moment as opposed to a migration to fixed income.