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The last thing anyone needs is another Hot Take about how President Donald Trump’s tariffs are rooted in unsound logic, are almost certain to make prices go up for American consumers, and will possibly even careen the world’s biggest economy into a ditch. Everyone, including the president , has heard it all before.
But a question I hear about the tariff debate now and then on social media or around the metaphorical water cooler is: “So what?”
The implication is that maybe we should all stop clutching our pearls and take a cue from Wall Street, where bankers are in a kind of vinyasa flow, om -ing through the chaos of Trump’s trade battles with Canada and Mexico — a skirmish that even the Wall Street Journal editorial page called the “dumbest trade war in history.” If the stock market isn’t worried, maybe the Trump tariff agenda isn’t actually the disaster economists predicted.
Of course, disasters — especially the economic variety — have a tendency of unfurling slowly at first. And then all at once.
The thing about Wall Street is that it behaves like a hormonal teenager would: fretting about tariff headlines one day, obsessing about the Fed the next, and every now and then swinging from euphoria to despair when the news doesn’t break in its favor.
Right now, markets seem to have a bit of tariff fatigue. They’re humming along on the upsides of Friday’s jobs report (a little weaker than expected but solid overall), and casting their eyes forward to the January Consumer Price Index due Wednesday, plus Fed Chair Jay Powell’s testimony on the Hill starting Tuesday. In fact, global markets merely shrugged when Trump told reporters on his way to the Super Bowl that he planned to announce a 25% tariff on all steel and aluminum imports.
All this to say: The Street is hardly a reliable barometer of our long-term economic health. And just because markets are bored of the tariff rhetoric doesn’t mean the danger isn’t real. As economist Claudia Sahm wrote in a Bloomberg op-ed last month, even talking about tariffs tends to stoke inflation.
“When consumers take the potential costs seriously, tariffs do not even have to go into effect to cause an increase in prices,” Sahm wrote. “That’s why it’s so risky to use the threat of tariffs as a bargaining chip.”
Early indicators suggest Americans believe Trump isn’t bluffing. On Friday, a preliminary reading of US consumer sentiment sank to a seven-month low because of expectations that high inflation will return within the next year. And on Monday, the Federal Reserve Bank of New York survey showed consumers expect inflation over the next five years to rise to 3%, the highest reading since May.
In short, consumers aren’t stupid, and American consumers especially don’t need to be told twice to buy now before prices go up. Expectations shape behavior. Behavior shapes prices. Prices go up when demand does. (As anyone shopping through the pandemic knows all too well.)
And that’s the “so what” of it all. Trump’s flood-the-zone approach to his first three weeks (it’s only been three weeks) is part of political strategy designed to overwhelm and distract. The chaos is the point , as so many political commentators have noted. But even the seemingly performative chaos — plans for the US to take over Gaza, say, or Greenland, or imposing so many tariffs it’ll magically undo decades of globalization — has a real-world impact.
I haven’t seen a better summary of the moment than this quote from Nick Pinchuk, the CEO of toolmaker Snap-On, as reported by the WSJ’s Laurent Thomas, Ben Dummett and Chip Cutter on Monday:
“Nobody knows what’s up,” Pinchuk said on a conference call Thursday. “It’s like being on Space Mountain at Disney World. You get on Space Mountain, you get in a car, and you’re in the dark and the cars go left and right, left and right and abrupt turns, you don’t know where you’re going, but you know, you’re pretty confident that you’re going to get to the right place at the bottom.”
At. The. Bottom.
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