Crazy contrarian

Ok, we need to issue the mother of all disclaimers here in order to not lose friends and alienate people. Nothing in this text is our view – we are just presenting what the massive contrarian take on tariffs would be – with a fair amount of “spin”. Here we go – roll the tape.

Trump Tariffs are smart

One could argue that these trade policies, which on the surface fly in the face of the academic evidence, are politically smart because:

1. Trump was dealt a bad hand by Biden. After so much fiscal stimulus (which HAD to be unwound) was pulled back, we were going to have a recession in 2025 anyway. Why not expedite the recession so we have time to recover by the midterms?

2. A recession will not only bring down 10-year yields, which Treasury Secretary Bessent has told us is the key market to watch, but it will also bring down inflation, which was possibly the number one issue in the election. This may mean the US Treasury can more easily sell the $9 trillion in bonds it must. 

3. Globalization has been in the process of being unwound since the Great Financial Crisis and this was simply the last straw. We were inevitably moving in this direction not only because we have geopolitical competitors like China, but because Americans no longer trust politicians who have both sent their kids to foreign wars but also shown high levels of corruption (seriously, have you looked at the net worth of our members of Congress?)

Source: Stay Vigilant

Globalization had plateaued anyhow

On this one measure, globalization did peak in 2008 and has never recovered.

Source: World Bank

Stan the (tariff) man

In January, Stanley Druckenmiller said on CNBC: “As long as we stay in the 10% range, …I think the risks [from tariffs] are overblown relative to the rewards, the rewards on high, it’s more like they’re the lesser of two evils.”

On tariffs broadly, Druckenmiller also said at the time that he views them as “simply a consumption tax, that foreigners pay for some of it.”

Yes, we know that he also said that he did not want to be seen as generally supportive of tariffs, and we acknowledge that this post is a little one-sided.

Cheaper mortgage

Bond yields have dropped, causing mortgage rates to decline.

Source: Yardeni

Conspiracy theories: “Sounds nuts to us”

“Conspiracy theories are usually wrong even though they seem to explain a lot. The latest conspiracy theory floating on social media is that President Donald Trump is causing a recession to bring interest rates down to reduce the federal government’s net interest outlays and to lower mortgage rates to make homes more affordable. A recession would also weaken the foreign exchange value of the dollar, which would boost exports and depress imports. Trump’s tariffs should force manufacturers to move to the US and reduce foreign demand for American farm products, which would lower food prices in the US. What about the stock market crash? Not that many Americans own stocks, according to this conspiracy theory. Sounds nuts to us!” (Yardeni)

Donald Robin Hood Trump

On April 4 at 8:25 am, Trump reposted a TikTok video on his Truth Social that follows this script! The original tweet noted, “Trump is playing chess while everyone else is playing checkers.” The video concludes that Trump is “taking from the rich short-term and handing it to the middle class through lower prices.”

More than offset…

In his CNN interview Saturday morning, Navarro claimed that thanks to Trump’s policies, the price of oil has dropped sharply, thus reducing the price of gasoline. He was making the debatable claim that the pain the tariffs are causing for stock investors has been more than offset by the gain of lower gasoline prices and mortgage rates.

Source: Yardeni

Thought leadership….

Presented without comment.

Source: Refinitiv

Art of the deal

Top White House economic adviser Kevin Hassett acknowledged that other countries are “angry and retaliating,” and, he said, “by the way, coming to the table.” He cited the Office of the U.S. Trade Representative as reporting that more than 50 nations had reached out to the White House to begin talks.