Trump takes on the Global Trade Crisis with Tariffs that are Spooking Investors

By Mitchell Anthony

April 4, 2025

 

America continues to thrive despite an industrial sector that has been forced into decline by unfair Global trade policies.   America’s success is under siege and we must take action to change!  While globalization is great in a world with common goals.  That has not materialized and the goals of America are not really aligned and shared by the rest of the Globe.  America is and has been all about innovation and capitalism, while the rest of the world embraces socialism and communism at the expense of American wealth.  This is now forcing America to reverse course from the globalistic path that we pursued in the 90’s.  China is a huge threat to our freedom and our capitalistic success and we can no longer give away our wealth to socialistic countries and allow unfair Trade competition. Past leaders have been too weak to take on this fight.  While Trump is a lot of puffed air and does not have good poise or dignity, it seems that he is the right medicine for what America needs today!!

 

Is there a Global Trade Crisis

  • Yes, there is a global trade crisis for American Manufactures of Goods, and for producers of natural resources.
    • American exports are blocked from foreign markets due to substantial duties, tariff’s and regulatory rules for competing in foreign markets.
    • America did not become an economy with heavy composition of services by choice. We were forced to take that path because Washington failed to stand up to global trade barriers and let good jobs and industry go to China which turned skilled workers into hamburger flippers.

Who is suffering as a result of this Crisis

  • American companies that produce manufactured goods and producers of Commodities like meat and poultry.
  • These companies cannot compete in the globe with their products due to tariffs that raise prices of their products for foreign consumers and further cannot compete at home because America does not tariff foreign imports.

 

Is the American Economy effected by this crisis

  • Absolutely – America’s manufacturing sector is shrinking because it cannot compete fairly.
    • American manufacturing Jobs are dwindling and workers have had to move to lower paying jobs in service sectors or retire.
    • As a result, the service sector in America has grown and is now 80% of GDP and employing to many of our skilled manufacturing workers who were laid off and forced into early retirement or take pay cuts. America would be much stronger with those workers still in manufacturing jobs.

 

  • These trade barriers have existed for decades and have progressively gotten worse over the last 10 years.
  • China and most of the G-7 have protectionist policies in place that make American products significantly more expensive abroad than they are in America.
  • America has not retaliated or attempted to level the playing field under past administrations that were reluctant to rock the boat or mess with the status quo.
  • The trade deficit is now well over $1 trillion and growing exponentially up from 200 billion just a decade ago.
  • Tariffs are used for the most part on manufactured goods and do not apply to services that are produced within a country.
    • Investors have rationalized that the problem with tariffs on US manufactured goods can be absorbed because manufactured goods are only 20% or so of American GDP.
    • This is misleading because America is the second largest manufacturer of goods in the globe producing approximately $3 trillion of manufactured goods each year second only to China which produces approximately 4.5 trillion. The rest of the world is far behind America and China in manufacturing goods.
    • Every economy in the world produces more services than goods and so the fact that America is 80% services is not extremely unusual as even China who is claimed to be mostly a manufacturing economy actually has 60% of its economy based upon services.

 

2025 Q1 Economic Review

 

Consumption – Hard data points (actual sales data) are strong but soft data points (surveys) show weakness.  Most of the strength is in the service sector, the manufacturing sector continues to show signs of weakness with demand for durable goods at recessionary levels. Most retailers have reported weakening trends in consumption over the last six weeks of the quarter.  Seems to be tied to the lower confidence that has come as a result of the unknown impact of tariffs proposed by Trump.

 

Employment – unemployment stands at 4.2% still close to the lowest in history for America.  The composition of jobs however has the highest ratio toward service sector jobs than ever in history.  Service sector jobs tend to be lower paying then manufacturing jobs or white-collar professional jobs.

 

The best part of the economy continues to be web computing, artificial intelligence, digital devices, obesity drugs, entertainment and leisure, and healthcare. Employment in these areas is quite robust with wages outpacing inflation.

 

 

Financial Market Review

 

2024 was a terrific year for stock markets and followed another terrific year in 2023.  The first few months of 2025 began on the same strong trends that were seen in 2023 and 2024 with secular growth companies reporting greater earnings and raising expectations, while cyclical industrial names continued to lower expectations. Leadership in the equity markets was skewed heavily toward large-cap growth companies and the magnificent seven names as well as the FAANG names. Ten year treasury rates were steady throughout most of the quarter reaching as high as 4.5% at times and then falling as low as 4%.  Inflation expectations began the quarter quite low but by the end of the quarter expectations had risen over 100 basis points based upon fears that developed as the media magnified the effect tariffs would have on inflation and seemed to be working to make a news item that was not that newsworthy something to note.

 

After rising 25 to 30% in 2024 stocks fell 4 to 8% in the first quarter of this year and then even further in the last few days. The loss in the first quarter basically put stocks back to where they were at the beginning of the fourth quarter of 2024. While the selloff we have experienced over the last six weeks has not been comfortable we must put it into perspective as only giving back a small portion of what has been gained over the last two years.  Stocks could well see highs again for the year within a few months as more clarity on the inflationary impact of the tariffs imposed by Trump become known and the positive impact of the move to level trade practices is embraced.  Most economists and market strategists evaluating the impact of the tariffs have forecasted less than a 1% loss to GDP as a result of the higher prices that they ultimately think will be felt by consumers.  Markets have sold off as they brace for an irrational war on tariffs by Trump and the rest of the world.  As of the writing of this article it is still unclear what tariffs that Trump is proposing will amount to for each country.  The chart and graph that he produced on liberation day did not identify whether the tariffs that he proposed were baseline tariffs or the maximum tariff rate that might be paid on a specific good.  It would seem that the baseline tariffs on each country will be substantially less than what he had listed on his chart.

 

Interest rates declined toward the end of the quarter causing treasuries and corporate bond portfolios to increase by 3 to 5% reversing some of the losses that had occurred over the last year in bond portfolios.

 

For the most part investors fled risk assets with the exception being gold.  Gold advanced almost 19% during the quarter as bitcoin declined by almost 10%.

 

Economic and Financial Market Outlook.

 

 

The Economy

 

The outlook for the economy and the financial markets is bright.  Employment is robust and despite consumers stating that they have no confidence they continue to spend and consume with trend like growth.  If the tariffs turn into substantially higher prices than consumption will likely fall and we will have a slowdown or recession.  It would seem that a significant slowdown or recession is still not on the horizon given the trends in employment and the robust consumption from the corporate superstars that drive our economy.

 

The Financial Markets

 

Equities will find a bottom once there is clarity on the tariffs and the world does not escalate the attempt by Trump to level the tariffs.  Trump’s announcement on liberation day did not provide clarity and only produced more question marks unfortunately.  It would seem that clarity will be seen within the next week and with it will come a rally in the equity markets as the baseline tariff rate will be substantially less than the tariff rate shown on Mr. Trump’s chart.

 

Secular growth companies that have been growing at 30% or more have seen substantial correction over the last six weeks despite no decline in earnings expectations from street analysts or the company.  However what matters most is expectations from investors. Investor expectations for earnings for the magnificent seven have fallen substantially causing the stocks to be hit by 20% or more declines.  Investors speculate all the time and buy and sell without knowledge of what really is on the horizon.  As expectation rise again, the markets will adjust quickly to higher prices if it turns out that the lower earnings expectations were not accurate.

 

It is unknown how successful Trump’s ability to negotiate a better trade environment for America without starting a trade war. We will just have to wait and see

 

We remain optimistic