Stocks will begin Friday deep in the red following news that President Trump is threatening new tariffs for products imported from Europe, and a declaration of 25% tariffs on iPhones sold but not made in the United States.
The bad old days of tariffs are back.
I want to be clear: a strong consensus of investors believes that the president’s tariff policy is an unmitigated disaster. This is not a political statement. If President Trump is using tariffs as a negotiating strategy to get better trade deals, he’s doing that poorly.
Tariff threats should be made in private to trade negotiators. A public declaration that 50% tariffs will be placed on imports of European goods beginning June 2 is erratic behavior. It causes unnecessary uncertainty. It leads investors to flee U.S. financial markets.
The Apple tariff strategy is plainly bizarre. Apple is a great American company that employs tens of thousands of Americans in high-paying jobs. Penalizing Apple for not making iPhones in the United States drives up prices for Americans while jeopardizing six-figure jobs at Apple.
Investors don’t see a policy that will lead to more iPhone manufacturing jobs in the United States. They rightfully see the willful destruction of a great American business for short-sighted political gains. Worse, this poor policy can be used against Nike and other iconic American brands.
To be fair, there is truth in some of what the president is saying about trade barriers in Europe and China. However, tariffs are taxes paid by American importers. Those taxes are ultimately passed through to American consumers, hurting sales volume and profitability.
Investors are going to sell this latest tariff flare-up. Bears will talk about a test of the April lows for the S&P 500 at 4,835. There is critical support at 5,770, the 200-day moving average. If the benchmark opens below that level, bears will be emboldened. Be careful.
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