How does this financial crisis differ from those in the past?
I have lived and traded through numerous financial crises over the years. They have come in different shapes and sizes, both market and geopolitical driven.
What they all had in common was that they were not intentional or self-inflicted. Even the Covid crisis, apparently man made, was the result of an accident and not intentional actions.
This brings us to the current crisis generated by uncertainty and concerns over the invoking of reciprocal and other tariffs by the Trump administration.
When you see stock markets falling sharply, inflation expectations rising and consumer confidence cratering, there is no other way to describe the current situation as being a crisis,
What makes this crisis different than any other I have lived and traded through is that it is self -inflicted and thus could have been avoided.
What makes it even more unsettling is that it seems to be based on questionable logic.
I have seen administration sources calling reciprocal tariffs a tax cut when in fact it is a tax increase that transfers money from the private to the public sector.This assumes the higher cost of imported goods is passed on to consumers, which is essentially a tax increase. On the other side of the ledger, the tariff fees collected go to the government.
So, if consumers pay $xxx bln in higher prices and in turn the government collects the same $XXX bln in tariff fees then there is no other way to look at this as being anything other than a potentially massive tax increase.
This brings us back to a crisis that is self-inflicted. As such, easing or escalating the fallout is in the hands of one man, President Trump.
In this regard, watch his actions and not his words even though markets seem to react to every new headline. This is especially true for the April 2 announcement on reciprocal tariffs. Read the fine print. Don’t draw conclusions from the initial reaction. See how markets end the week for a clearer picture.
Whatever the case, this is a self-inflicted crisis that remains in the hands of the president to fuel or ease. However, once the cat is let out of the bag it is hard to get it back in.
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