In the last four months, Donald Trump has warned us about a lot of things, and I'm sure I'm forgetting some:
- His desire to make Canada the 51st state of the US, to get his hands on Greenland and the Panama Canal, and to rename the Gulf of Mexico the Gulf of America
- To turn Gaza into a resort where life would be good
- To respond to the "mistreatment" of the US by countries around the world with tariffs—the most beautiful word in the dictionary, according to him. No one is spared—friends, enemies, or even the small country of Lesotho, which has been hit with the highest customs duties at 50%.
- The need to sign an executive order to "Make America's Showers Great Again"
- His attempts to negotiate peace in Ukraine while wrongly blaming the country for starting the war.
These are just some of the unpredictable statements and decisions that have been made. Their impact on international relations and global trade is enormous.
On the financial markets, these decisions are creating almost unprecedented movements. As we know, the narrative, the story that investors tell themselves about the future, is of paramount importance. This is all the more true in an era when markets are interconnected and information travels at nanosecond speed. So when this pattern is broken and then suddenly resumes—for example, after the announcement that customs measures would be postponed for three months—the variations take on enormous proportions. Wednesday, April 9 saw the third-largest single-day rise in the S&P 500 since World War II.
Now, Donald Trump and his administration seem to have decided to focus on China, which was the only country to respond forcefully. Beijing said it was open to dialogue two days ago, setting as a condition that the United States must show more respect and appoint a chief negotiator to represent it. Earlier this week, the US president raised the possibility of imposing tariffs on the semiconductor and critical minerals industries.
But as we have seen, yesterday's announcements may be the opposite of tomorrow's. The administration targeted everyone at the outset before backtracking and postponing the measures for three months. It targeted the automotive industry and threatened the pharmaceutical and semiconductor sectors. It launched an investigation into the US's dependence on imports of critical minerals, with the possibility of adding specific tariffs. It has abandoned some of the surcharges on electronic products imported from China that it had decided on earlier. All this makes it difficult for economists and central banks to anticipate future scenarios. Will there be a recession? Should interest rates be lowered when trade barriers could cause inflation to resurface? What will be the consequences of all this for international relations and, therefore, for global trade? The future is by definition unpredictable. But it is even more so in the current climate. A bit like dart throwing, really. And that is precisely what the markets fear.
Drawing by Amandine Victor for MarketScreener
