I guess now we know why President Trump has been badgering the Federal Reserve into lower rates — despite an estimated 3% expansion in GDP last quarter.
His tariffs hit in full force Friday, shocking the global economy and delivering a monster drop to the stock market.
Trump’s tone suggests that the TACO acronym — Trump Always Chickens Out — has irked him.
“THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE — IT STANDS STRONG, AND WILL NOT BE EXTENDED,” he blared in all caps.
The “universal” tariff for goods coming into the United States will remain at 10%, the same level that was announced on April 2.
However, that 10% rate only applies to countries that buy more from the U.S. than they sell. Countries that have a trade surplus with the United States (there are more than 40 of them) have a 15% baseline rate.
With that, the average U.S. tariff rate will rise to 15.2% from 13.3%, according to Bloomberg Economics — up from just 2.3% before Trump resumed office.
Additionally, Trump plans to unveil another slate of tariffs on pharmaceuticals, semiconductors, critical minerals, and other key industrial products in the weeks ahead.
Sheerly from an economic perspective, this is stupid.
The only outcome that can result from this trade policy is higher prices for American consumers and weaker economic growth across the board.
The notion that companies will erect a slough of factories overnight and resurrect America’s manufacturing economy is mind-boggling.
But here’s the thing…
These tariffs aren’t really about economics.
They’re about politics.
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The nations facing trade penalties aren’t just being rapped for dubious behavior. They’re being penalized for their attitudes toward Trump and his positions.
For example, Canada is being blistered because it dared to recognize Palestine as a state.
“Wow! Canada has just announced that it is backing statehood for Palestine,” Trump exclaimed on Truth Social last week, reacting in real time. “That will make it very hard for us to make a Trade Deal with them.”
Meanwhile, Brazil is being hammered with a massive 50% tariff on exports because it’s holding his friend and ally Jair Bolsonaro accountable for an attempted coup.
And India is being taxed for its economic partnership with Russia.
It’s also important to remember that, domestically, this is a way for Trump to dominate the conversation — flooding headlines and flexing his political muscle.
The question, though, is what sticks and what doesn’t.
This is what we saw in April and it’s what birthed that TACO acronym.
When the market finally began to take Trump’s policy seriously, it tanked — just like it did Friday.
Then, when he walked it back, it recovered to all-time highs.
And I fully expect that pattern will repeat.
The reality is Donald Trump loves sowing and hates reaping. And his trade policy — which may not even be legal and continues to be contested in court — will only reap misery.
Like I said, the early estimate for U.S. GDP growth was 3%, but the economy grew just 1.2% in the first half of the year. Furthermore, last week’s labor data, consumer spending trends, tepid earnings, and dour forecasts suggest the economy has fully stagnated.
Trump’s all-out campaign against Jerome Powell has not yielded the desired result of lower rates. And his tariff policy WILL strain consumers and America’s broader economy further.
That misery will force Trump to concede, just as it has in the past.
Even the trade deal victories Trump has declared are more sizzle than steak. Which is to say, they haven’t yielded any tangible results, with trade partners dismissing them mostly as theatrical.
Ultimately, there are two separate worlds…
There’s Trump’s world, where he dominates the discourse, exercises power, and revels in the reaction.
And then there’s the real world, where markets react, prices rise, and people get fed up.
When those two worlds collide, Trump carries on the rhetoric but reverses course and moves on to some other headline-grabbing controversy.
Until that changes, I say buy the dip.
Specifically, I’d focus on sectors like precious metals, tech, utilities, communications, financials, and energy. These have been the best-performing fields to date, and they have less exposure to tariffs and consumer spending.
That’s key, because while I believe Trump will chicken out, we don’t know how long it will take or what damage will be done before he does. So prioritize safety and enjoy bargain hunting.
Fight on,
Jason Simpkins
Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more… He also serves as editor of The Crow’s Nest where he analyzes investments beyond the scope of the defense sector.
For more on Jason, check out his editor’s page.
Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts.
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