Is There Something Going On With Tariffs?

April 2025

President Trump’s April 2 Executive Order announced the biggest shift in U.S. trade policy in decades. Maybe it is questionable economics, maybe it is overdue, maybe it is part of a grand geopolitical goal that goes beyond trade. Subtle it was not.

We won’t know for a couple quarters what the effect on Main Street will be. It could mean higher prices, fewer jobs (stagflation), or it could be not a big deal, especially if trade agreements are reached soon. Wall Street and stock prices didn’t wait - they assessed instantly that the world is a slightly less valuable place. I don’t disagree, but for a reason I’ll come back to.

A couple quick points about your portfolio. One, the stock market remains a fundamentally attractive asset class for the long run. At moments like this when one asset class is unexpectedly weaker, we can take advantage of it by selling a more stable asset class we already own.

Two, everyone this past few days and weeks has been focused on the negative, because stocks are down to start the year, and to start April. Let this chart remind you that the stock market doesn’t go up every day, and in fact, always recovers from down periods.

Before April 2, the incoming administration’s signaling about trade policy was choppy and confusing. Foreign trade partners, U.S. companies, and U.S. consumers were dizzy from the whipsawing tariff announcements. “It’s Trump’s negotiating style” many said. “There’ll be a deal.” Those may yet be true. That inconsistent messaging was leading to recalibration and hesitation about spending plans. Add in the “Liberation Day” cudgel and economic uncertainty is writ large.

Just because the policy rollout has been poorly communicated, or irreverent compared with past policy, doesn’t mean the new policy is wrong. I agree with most economists that tariffs, employed by any country, are counterproductive. However there are some lousy, longstanding fiscal and tariff practices that we (and the world) have become complacent about, that, unchecked, will have a serious side effect in the future. If new reciprocal tariffs lead to mutually lower tariffs than before, investors will cheer.

Every so often there is a groundswell of support for a particular issue, or, behind a certain candidate. When a change agent actually gets power, the opposition and a few of the agent’s supporters develop a rapid nostalgia for the old status quo. Ask Barack Obama or Javier Milei. Sometimes agents meet the moment and sometimes they make mistakes.

We are here, at the right side of the red arrow. Our portfolios are doing well. Things will be continue to be very good in the long run.

Sincerely,

Chip