Why Wall Street is brushing off Trump's escalating tariff threats

The stock market has learned to love President Donald Trump’ tariffs.

- THE WASHINGTON POST

Wall Street revolted in April after the president unveiled plans for the highest US import taxes in more than a century. Stocks lost nearly 12% of their value in less than a week, while the rate on the 30-year Treasury bond made its biggest jump since 1982.

The financial market gyrations caused the president to back off and pause the tariffs to open a 90-day negotiating window. The weeks that followed were a blur of tariff attacks, retreats and confusion emanating from the White House.

But since its early April low, the S&P 500 has shrugged off its disquiet over trade policy to gain an astonishing 26%. The president has celebrated the market rebound as validation of his disruptive bid to reshape global trade.

The danger now is that either Wall Street or the president will go too far.

“I do believe the risks are building. ‘Trump now feels a certain sense of invincibility and is willing to take positions on tariffs that are much more aggressive than probably anybody anticipated, because he does seem to believe he can get away with anything,” said Douglas Rediker, chairman of International Capital Strategies, which advises institutional investors.

On Saturday, Trump threatened to impose 30% tariffs on goods from the European Union and Mexico in a fresh escalation of his trade offensive that left room for further diplomatic efforts before the levies take effect August 1.

Investors feel free to continue bidding up stock prices because they assume Trump will always back down from his most costly tariff plans, market analysts said. But the president views stocks’ steady rise as a license to intensify his trade threats, acting out the economic policy equivalent of his 2016 quip that he could “stand in the middle of Fifth Avenue and shoot somebody” without paying a price.