March 12, 2025: Dazed & Confused

No sentient being should be surprised of President Trump’s affinity for tariffs. In his first term, President Trump raised tariffs on imports from China, sparking retaliatory tariffs and a mild trade war in 2018. Concerns about the fallout of that trade war led investors to dump stocks and other risky assets late that year, sending the S&P lower by 14% in the fourth quarter.

In his last campaign, President Trump promised further tariffs, including a 10% across-the-board tariff on all imports and a 60% tariff on goods imported from China. That proposal may have struck some business leaders as blunt and, depending on one’s perspective, potentially harmful; but the proposal was nonetheless straightforward. It was a proposal, in other words, that a manager could plan for. In practice, the new administration’s tariff policy has been less straightforward, with the unpredictability of those policies resulting in the highest levels of policy uncertainty in decades.

To summarize the announced and delayed and reannounced tariffs would require more words than allowed here. And if explaining these announcements in a few paragraphs is hard, it is much harder to plan long-term business and financial investments around them. Perhaps it is no surprise that, in response, investors have taken the last month to sell their winning stocks and hide out in short-term bonds until the policy fog clears.

Weekly Market Update: March 12, 2025