“(…) This is creating financial market volatility unseen outside of exogenous crises like Covid-19 or the 2008 Global Financial Crisis. For example, on March 3, German equities had their best day since late 2022. The next day, March 4, was their worst day since 2022. There are many more examples, but the bottom line is that when the most powerful country in the world decides to change/disrupt global trade, geopolitical alignments and fiscal policy all in one go, there will be fallout, which is what we are seeing in the markets today. Investors are faced with unprecedented uncertainty about the short- and long-run impacts to the U.S. and global economies, the global political structure, and asset prices. This means that the initial consensus post-inauguration that President Trump’s policies would reinforce “exceptional” U.S. economic performance has been upended. The assumption that an “S&P put” on his more aggressive policies would keep him in check does not seem to be playing out. His willingness to implement high tariffs seems based on two reasons: first, to raise revenue relatively cheaply (which is very debatable), and second, to remake global trade, reducing the large U.S. trade deficit as surplus economies (namely, China and the European Union) remain adamantly against boosting their economies.“
Morten W. Langer
