The implementation of President Trump’s new tariff policies has sparked intense debate, yet daily life continues largely unchanged just days after their introduction. In New York City, Central Park remains filled with its usual mix of tourists snapping photos, locals walking dogs, and joggers maintaining their routines, despite the rainy weather. Even the financial district shows no obvious signs of distress, with junior bankers from J.P. Morgan seen going about their normal lunchtime activities near Grand Central Station.
While the Wall Street Journal’s editorial board has already crowned China’s Xi Jinping as the victor in this trade dispute, such declarations appear premature given that the 10% minimum tariff has barely taken effect. The possibility of China seeking negotiations remains open, which could quickly invalidate such hasty conclusions.
The fierce opposition to these tariffs appears largely driven by stock market reactions rather than tangible economic impacts. Notable economist Jeremy Siegel’s comparison of the tariffs to the “biggest policy mistake in 95 years” follows his previous controversial call for an emergency 75 basis point rate cut during the yen carry trade situation – a prediction he later walked back.
This market correction was arguably inevitable given current conditions. With interest rates at their present levels, economic slowdown and market adjustment were mathematical certainties. Warren Buffett’s recent decision to increase his cash holdings to $330 billion shows foresight of this correction. The Shiller
price-to-earnings ratio had reached its third-highest level in history, exceeded only by pre-housing crisis and pre-tech bubble periods.
Some businesses are already adapting to the new landscape. Restoration Hardware, despite seeing its stock value halved, is relocating manufacturing to North Carolina. Their CEO expressed confidence in the administration’s negotiating approach, demonstrating measured leadership amid market volatility.
The current market “crash” requires perspective – the S&P 500’s price-to-earnings ratio of 25.1x remains 40% above the historical average of 16.1x. The Dow Jones, trading around 38,000, matches its level from a year ago and has gained 82% over five years. Essential services and supplies remain unaffected, with no evidence of supply chain disruptions or significant price increases. Even oil prices have decreased rather than risen.
These early reactions may say more about market participants’ psychological responses to portfolio losses than about the actual economic impact of the tariff policies. The natural discomfort with change and market volatility appears to be driving much of the negative commentary, rather than concrete evidence of policy failure.
While the long-term effectiveness of these tariff policies remains to be seen, the rush to declare them a failure after just three days seems premature. The current market adjustment, though significant, represents a return to more historical valuations rather than unprecedented economic catastrophe. As businesses and markets adapt to these changes, a new equilibrium will likely emerge, though the path there may challenge the comfort levels of many market participants and commentators.