The US Federal Reserve’s favorite inflation gauge came in pretty plain vanilla Friday, perhaps pointing the way toward Wall Street’s favorite flavor: rate cuts. But even that bit of good news wasn’t enough to calm investors trying to read the tea leaves as to what the White House will or won’t do, means or doesn’t mean when it comes to triggering a regional or global trade war. And as if that weren’t bad enough, President Donald Trump issued a fresh round of amorphous trade threats today. The S&P 500 erased a rally that approached 1% while the greenback hovered near session highs amid reports there will be tariffs come Saturday, or maybe in March, or maybe not at all. “Going into the weekend it seems like even staff closest to the Oval Office don’t have all the details,” said Max Gokhman at Franklin Templeton Investment Solutions. “So some bulls are going back to the barn to sit out a likely storm.”
With the exception of his one-day showdown with Colombia, Trump has failed so far to follow through on his innumerable promises of immediate tariffs against China or America’s two neighbors. So what happens if he finally does it? The 78-year-old Republican now says tariffs are really coming tomorrow. Assuming that happens, the conventional wisdom among economists is that it will be some version of an own goal, with Americans suffering higher inflation or decreased economic growth or both. But when it comes to equities, the effect is unclear. “Because we don’t know what’s going to happen, we have to assume that there’s a general increase in tariffs on just about everything which is imported into the states,” Chris Beckett, head of research at Quilter Cheviot, said. “Then you start worrying about tit-for-tat retaliation and general reductions in free trade.” Here’s a look at which global stocks and sectors could be most at risk from Trump’s threats.
