Wall Street did the math, Trump’s tariffs are bad news
Markets recoiled. Economists balked. The Wall Street Journal’s editorial board labeled it “The Dumbest Trade War in History.”
President Donald Trump followed through on his latest tariff threats, slapping duties on Mexico, Canada, and China on February 1—though Canadian energy received an exemption. The response was swift: Canada retaliated immediately, and Mexico signaled it would follow suit before an eleventh-hour reprieve.
After a call with Trump, Mexican President Claudia Sheinbaum announced a one-month pause on the tariffs in exchange for deploying 10,000 troops to curb fentanyl trafficking at the U.S. border.
The damage had already begun. Markets plunged. Global stocks sold off as investors processed the potential fallout of a renewed trade war. The S&P 500 dropped as much as 1.9% before paring losses to close down 0.6%.
JPMorgan, in a research note dated January 31, warned that the latest policy moves “may tilt into an unintentionally far less business-friendly stance.”
Few on Wall Street see upside in Trump’s latest move. Economists at Deutsche Bank warned of a “manic Monday” following the tariff announcement, and that’s exactly what markets got. Goldman Sachs predicted consumer prices would rise if the duties remained in place long term. Capital Economics took a grimmer view, suggesting the tariffs could be the first strike in a “very destructive global trade war” and even push Mexico and Canada into a recession.
Former Treasury Secretary Larry Summers called the policy “a stop or I’ll shoot myself in the foot” strategy, arguing it would drive up costs for American consumers and threaten jobs.
The Financial Times’ editorial board dismissed the tariffs as “an absurdity.” Even the pro-business Wall Street Journal’s editorial board, which has defended GOP policies in the past, found no justification for slapping a 25% tax on Mexico and Canada and a 10% duty on China.
“This reminds us of the old Bernard Lewis joke: It’s risky to be America’s enemy, but it can be fatal to be its friend,” the Journal wrote.
Trump has framed the tariffs as a tool to curb illegal immigration and drug trafficking, claiming the short-term pain will be worth it. “THIS WILL BE THE GOLDEN AGE OF AMERICA!” he declared in a social media post.
But the reality is more complicated. The move risks upending decades of trade agreements and reigniting global supply chain disruptions.
The White House maintains that talks with Canadian Prime Minister Justin Trudeau and Chinese officials are ongoing. Whether they lead to meaningful concessions remains to be seen.
With a one-month pause in place, the finance world is left watching to see whether Trump’s tariffs were a bluff, a bargaining chip, or a long-term shift in trade policy.
What’s clear is that Trump 2.0’s economic turbulence is just getting started.