Donald Trump’s erratic tariff threats are affecting stock market investors’ behavior.

Ever since U.S. President Donald Trump walked into the Oval Office in late January, the term “tariff” has been tossed around, targeting key U.S. trading partners such as Canada, Mexico, Europe and China.

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Trump’s erratic tariff threats have created a climate of confusion and uncertainty in the global economic landscape. In response, major economic powers have promptly implemented countermeasures to protect their interests.

Within less than two months, Trump’s bold, if not chaotic, choreography has left many wondering: Is the global free trade about to hit a sour note?

GLOBAL FREE TRADE PLUNGED INTO CRISIS

“Economists disagree on so many things, but on one thing that they’re pretty agreed on was the benefits of free trade,” said Steve Nolan, an academic economist from Liverpool John Moores University. But right now, what Trump is doing feels like it’s essentially throwing sand into the workings of how the global economy has been run for decades, he added.

In recent weeks, be it an ally, a neighbor, or a competitor, the Trump administration has rolled out a series of tariff policies: a 25-percent tariff on steel and aluminum imports from all countries, a 25-percent additional tariff on imports from Canada and Mexico, a 10-percent tariff hike on imports from China…

Those tariff policies mark a sharp departure from America’s traditional embrace of multilateral trade agreements. The U.S. unilaterally measures challenge the World Trade Organization’s ethos of lowering trade barriers and resolving disputes through negotiation.

“It all comes down to Trump’s fundamental disbelief in the idea that trade can be mutually beneficial. For Trump, it’s that concept of a zero-sum game,” Nolan pointed out.

The immediate fallout has been a series of retaliatory measures from affected nations. Canada, China, and the European Union have all announced their own tariffs on U.S. goods, escalating tensions and setting the stage for a full-blown trade war.

Imposing high tariffs and engaging in trade wars are detrimental to the global economy, potentially steering it toward recession and economic downturn rather than fostering growth, stressed Iain Begg, a professor from the London School of Economics and Political Science.

A STORM OF ECONOMIC UNCERTAINTY

Two days after Trump’s across-the-board tariffs on imports from Canada and Mexico, Trump said the U.S. would pause tariffs for one month.

Earlier this week, Trump said that he will impose an additional 25 percent tariff on steel and aluminum from Canada, in response to tariffs on electricity exports from the Canadian province of Ontario. But hours later, he reversed the plan after Ontario dropped the tariffs. All these back-and-forth and Trump’s erratic announcements made the world wake up each day with different headlines about tariffs.

“The main effects of these policies now are creating wild uncertainty,” Martin Wolf, chief economics commentator at the London-based Financial Times, said, noting that this on-again, off-again approach is “a violation of any sensible trade policy” and creates a chaotic environment that hampers business planning and disrupts international deals.

These tariff tremors also prompt volatility in global financial markets. Recent market jitters including notable dips in major U.S. stock indices and exchange rate movements reflect investor anxiety over potential escalations and economic slowdowns.

BOOMERANG EFFECT ON U.S. ECONOMY

While the Trump administration asserts that tariffs are designed to protect domestic industries and “bring wealth back to America,” many economists warn of negative consequences to its own. One immediate concern is the potential uptick in consumer prices.

“In the short to medium run, the dominant effect will be to make imports more expensive and to make Americans poorer and raise prices in America,” said Wolf, stressing that domestic substitutes for imports will not be done overnight.

Moreover, American firms and foreign companies coming to the U.S. could see production costs soar, supply chains disrupted, and business plans messed up. “Trump is supposed to be President only for four years, but the investment horizon for a major factory is well over that,” Wolf added.

British magazine The Economist also pointed out that Trump’s erratic policy is harming the reputation of American assets due to falling confidence and rising confusion.

“A lot of America’s strength comes from the fact that people view it as a safe place, a safe place to invest, a safe place to do business with, a safe place to be a global partner with, both on the business and the governmental scale. But that can go fairly extremely quickly and can be really hard to get back,” said Nolan.

STOCK INVESTMENTS ARE ALSO AFFECTED

Regardless of the final value of the U.S. tariffs, Trump’s trade war affects medium- and long-term investment decisions.

Especially in the case of large transnational investors, the imposition of tariffs invites them to consider whether sovereign bonds or a company’s stock will reflect the desired profitability levels at a given time.

Massive stock sell-offs reflect precisely this uncertainty, often harming companies that were economically efficient but are beginning to be perceived as unviable in Wall Street transactions.

In recent weeks, just as unprecedented falls in the stocks of technology companies have been observed, there has also been an interest among investors in acquiring gold as a means of hedging their bets amid Trump’s erratic policy narratives.

“Tesla, Apple, Google, Microsoft, Nvidia, Amazon and Meta have long been the darlings on Wall Street, but the tech companies have already lost US$2.15 trillion since January 1. Everything Trump touches dies,” said social influencer Dutchy Patrick.

“Wall Street is losing patience with Trump. Investors, who welcomed the Republican’s victory, are now fleeing the U.S. markets and exerting the toughest pressure to reverse his most controversial measures,” commented the Spanish newspaper El Pais.

teleSUR/ JF

Source: Xinhua – El Pais – EFE

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