Login Open account
Hong Kong S.A.R
Is Wall Street warming to Trump’s tariffs? Is Wall Street warming to Trump’s tariffs? Is Wall Street warming to Trump’s tariffs?

Is Wall Street warming to Trump’s tariffs?

Macro 6 minutes to read
Michael McKenna

Head of Editorial Content, Saxo Bank

Summary:  Former Goldman Sachs CEO Lloyd Blankfein waded into the trade war discussion yesterday with a pair of tweets asking whether Trump's tariffs might secure 'relative strength' for the US despite their many costs. The response revealed a key divide in how market watchers are discussing the controversial measures.

Consensus among economists has long held that tariffs are a net negative for the US economy or any other. In a poll of 60 economists held by Reuters in March of this year, nearly 80% said that President Trump’s tariffs against China – now significantly expanded from their March level – would do more harm than good.

“[The] rest said it would do nothing or very little. Not one respondent said they would benefit the world’s largest economy,” stated Reuters.
The latest barrage of tariffs and threats has done nothing to change most economists’ views. In the New York Times, 2008 Nobel Prize winner Paul Krugman commented that President Trump:

“... isn’t getting a single thing about trade policy right. He doesn’t know how tariffs work, or who pays them. He doesn’t understand what bilateral trade imbalances mean, or what causes them. He has a zero-sum view of trade that flies in the face of everything we’ve learned over the past two centuries.”

Krugman has been a strident opponent of the Trump White House since the inauguration, but in his essential privileging of 2000s-style, “high globalisation” policies over Trump’s transactional approach, he is joined by both the International Monetary Fund and World Bank, who have continually urged national leaders to return to the multilateralist status quo.

Yesterday, however, former Goldman Sachs CEO Lloyd Blankfein stepped in with an interesting re-framing of the discussion.
Lloyd Blankfein @ Twitter
Lloyd Blankfein @ Twitter
Critics of the US’ trade salvos have traditionally covered the dispute from an idealistic perspective, asking which is better: a world of tariffs, or one of free trade? Blankfein’s tweets, however, sidestep this issue of world-systems in favour of a simpler construction: who holds the bigger stick?

Implicit is the view that neither tariffs nor their absence need be celebrated as an ideal. Whereas Krugman prefers to characterise such measures as something like a style of governance, asking large questions about democracy and authoritarianism, Blankfein’s tweets view them as a cudgel used to secure specific ends.

(Blankfein is not alone in US finance, either – while criticising tariffs as a specific measure, JP Morgan CEO Jamie Dimon told the Council for Foreign Relations that the US 'absolutely' needed to spark the trade war with China in an April 4 address.)

Blankfein’s tweets were not without their critics, particularly in financial media; Markets Insider quoted National Institute of Economic and Social Research fellow Alex Bryson as stating that the former Goldman CEO’s labour strike analogy was “not a useful comparison” while at CNBC, Standard Chartered Global macro head Eric Robertsen said the tweets contained “an oversimplification”.

In our view, the style of thought contained in Blankfein’s tweets is as relevant as their tentative conclusion. The move away from considering which approaches might be seen in an ideal world, and toward which might be deployed in a given instance, is the same shift as the one underpinning the trade war itself.

It is not one that favours a simple solution.

On today’s Morning Call, our SaxoStrats team discussed the latest dent to risk appetite on the back of escalating trade tensions and the linked issue of Washington’s blacklisting of Chinese tech giant Huawei.
Retail sales
Like Saxo fixed income specialist Althea Spinozzi, we believe the trade war will get worse before it gets better, and are keeping semiconductor shares in view as a key barometer of Sino-US tensions.

Apart from the VanEck Semiconductors ETF (which dropped 10% in the wake of Trump's May 5 trade tweets) we view Amsterdam-based ASML, the world’s largest supplier of photolithography systems for the semiconductor industry, as an interesting European stock to watch as the conflict unfolds.
ASML
ASML Holdings (daily, source: Saxo Bank)

Quarterly Outlook 2024 Q2

2024: The wasted year

01 / 07

Macro: It’s all about elections and keeping status quo

Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

Read article

FX: The rate cut race shifts into high gear

As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

Read article

FX: High yielding currencies will start losing their appeal

Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.

Read article

Commodities: Year of the metals

Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.

Read article

Macro: What happened to the future?

The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?

Read article

The rise of populism: Far-right parties will influence the future

The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

Read article

Investing in China: Navigating Q1 amid economic challenges

Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

Read article

  • Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article

  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article

  • FX: High yielding currencies will start losing their appeal

    Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.

    Read article

  • Commodities: Year of the metals

    Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.

    Read article

  • Macro: What happened to the future?

    The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?

    Read article

  • The rise of populism: Far-right parties will influence the future

    The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

    Read article

  • Investing in China: Navigating Q1 amid economic challenges

    Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

    Read article
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R
Products & pricing
Asset Management
Platforms
Accounts & service
General
Other
Legal

Losses can exceed deposits on margin products. Please ensure you understand the risks.

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.