How the deployment of Trump prices turned into stockings

Before Wednesday, President Donald Trump’s prices had to be a problem for the markets and the economy, but manageable.

So much for this idea.

What happened in the place is something worse than the worst case, which had previously been the one where the United States would slap real “reciprocal” duties on its trade partners who would correspond to the prices billed to American exports.

In a perfect world, it would have triggered a series of negotiations that have led to transactions that all parties could live in the context of a Trump effort to change the trajectory of world trade, rehorse American jobs and transform the United States according to cheap foreign imports and sumptuous government spending into an economy focused on production.

The fears around this scenario were concentrated on a spark of inflation and perhaps a slight slowdown in growth.

What really emerged, however, was economic, market and geopolitical chaos.

It started with Trump’s Rose Garden press conference on Wednesday after the closing of the market, when the president recited, almost happily, his intention to “open foreign markets and decompose the barriers of foreign trade”.

The plan: SLAP 10% of prices on each American trading partner from Saturday, with individual prices for 60 other countries that would start in a week. Practically overnight, the actual American rate rate was set to go from 2.5% to 20% exceeded.

For the perspective, this has the potential to be the highest level since 1910-even higher than the devastating prices of Smoot-Hawley in 1930 that many economists consider as contributing to the Great Depression, making an exclamation point on the anti-world and maximalist protection of Trump which exceeded the worst fears of Wall Street.

Rapid reaction

If Trump was playing chicken with the rest of the world, he lost the first round.

China retaliated with 34% of prices on all goods, the leaders of the European Union also envisage countermeasures, and relations suddenly antagonistic with Canada and Mexico will have to be smoothed during the talks in American-mexico-Canada-Canada-Canada in the coming months.

The markets fell during the developments, sending actions in a two -day vicious sale which put the Nasdaq Composite, which houses the names of the powerful Silicon Valley that Trump courted in the first days of his second mandate, in a lower market.

Economists, on the other hand, were dismayed by rudimentary mathematics which were devoted to the calculation of the prices. Essentially, the administration, in a plan that the Washington Post declared, was prepared up to three hours before the announcement, simply divided the trade deficit with individual countries by the total value of American exports to design “reciprocal” prices which do not seem to be up to their invoicing.

According to the Center for Strategic and International Studies, the formula “punishes high deficit trade partners from which the United States is very important and buy little, not necessarily those with the most restrictive commercial regimes”.

“In short, the formula provides the best justice, at worst, the center,” said the center in an analysis.

A market beat

Investors responded by selling everything except bonds. After all, how can we know what is the appropriate price to pay for future profits when it is now practically impossible to determine future benefits?

In the best of cases for Trump, other countries will come to the table and lower prices, opening markets for American products and allowing the United States to access its markets. Even then, however, this will require a huge remutillage of an economy which, in 2024, owed 68% of activities to consumer spending and had a trade deficit of $ 903 billion.

Certainly, there were some first negotiations.

Trump boasted on Friday on Truth Social that he had “a very productive call” with the leader of the Vietnamese Communist Party of Lam, who would have agreed to reduce the prices to zero if an agreement could be concluded with the United States in addition, Trump revealed an additional interest in concluding an agreement with China in Tiktok, a potential for linchpin to breastfeed the climbing tensions between the two sides.

“Only the weak will fail!” Trump proclaimed Friday afternoon on Truth Social.

Although the stock market has certainly not failed during the week, it has given up a value of 6 dollars of dollars as Industrial average Dow Jones Hummed more than 3,900 points in two days, which she has never done before.

Investors looking for the federal reserve to go to the rescue lacked on Friday when President Jerome Powell said that the most difficult tariffs would have growth and, more importantly, would increase inflation. Powell has professed that the Central Bank would remain in its detention plan on interest rates, fingering hopes for the moment of a “Fed put” to put a soil under the carnage of the market.

“I think it’s the biggest political error in 95 years,” Wharton Siegel Siegel’s school teacher on CNBC said on Friday. “This is a self -inflicted injury. This is an uncompvious error – should not have happened.”

However, the crumpled numbers in the merchants of the Almanac action do not see a market of full -fledged bear to come, noting that corrections like the current one transform only in a third of time.

But it depends on a president who was recalcitrant in his current position, promising on Friday that his “policies will never change”.

Such a resolved objective can play Trump supporters, but it is also the most scared of the market right now.

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