Trump playing chicken with the world?
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What are the effects of Trump's tariffs on the markets?
Brian Stewart, welcome back to Wall Street Breakfast. We're in some times, aren't we, friend?
Indeed, yeah. Busy times.
Yeah, busy times, busy times, especially as the director of news. So tariff talk all around. What do you got for us? What would you share with investors?
Yeah, obviously. So we're recording this on Thursday as the markets fall following the tariff announcement last night. The tariffs were much more draconian than people had predicted. So the market is adjusting accordingly. If you're taking the optimistic view of the process that we're now involved in, Trump is in the process of doing a negotiation tactic. He's playing chicken with the rest of the world. These are sort of opening gambit to negotiations. And so over the next few weeks, we're going to see these mitigated or exceptions made to the point where they won't be as aggressive as they are now. The pessimistic view is that Trump isn't interested in coming to any sort of reasonable terms with countries, that there's a more kind of political component to the tariffs more than economic, and that they could conceivably spark a worldwide recession in the near future.
What are the things that investors should be most paying attention to as they navigate these unprecedented times in this market volatility?
Yeah, I think that the news flow over the next foreseeable future is going to be kind of how sticky are these tariffs? Is this the end state that we're just going to put these tariffs in place? Just to give some perspective to listeners who haven't sort of dug into the details yet, it's 10%, kind of a minimum. Every country gets at least 10% tariff. And then through a... a equation related to the trade deficit that we have with various countries, a tariff rate sets. And so the highest rates on countries like Cambodia is 49%. And so I believe doing this off top my head, but I think China was 34% on top of the 20% that we'd already put in place. So extremely high in sort of normal sort of economic structures, the
the tariffs are just going to be passed on to consumers. So you can expect items that are coming in from those countries to just become 49% more expensive or 34% more expensive, depending on where they come from. So as we kind of look at the fallout today, unsurprisingly, you see a lot of declines in the retail sector, especially in the smaller cap and mid cap retail space.
How are retail and tech sectors reacting to the tariffs?
So just to give some examples, like Five Below, a low price retailer that gets a lot of items from overseas retailers, China, Taiwan, Vietnam, those kinds of places. So it's down 26% as we're speaking. Gap is down 18%. Kohl's is down 24%. Victoria's Secret's down 20%. So companies that have a supply chain that's very, very reliant on those countries are going to see a hard hit. We're also seeing a lot of tech stocks get hit. One of the standouts is Apple, which is down about 8%, getting back to levels last seen last summer. Also just kind of doing a quick check of the Magnificent Seven. We have Amazon down 7%, Nvidia down six, Meta down six. They're all kind of reaching september levels one i guess you'd call it a standout in terms of how well it's holding up today is microsoft it's only down one percent today but it's just off a 52-week low down 10 so far this year so it's already kind of priced in some of this action so we're seeing kind of a broad-based focused on consumer and technology stocks as like i said we're just adjusting to the reality and kind of trying to figure out what the reality is going to be going forward
Before we leave the tariff conversation in favor of some stock specific news, anything noteworthy to point out about the tariffs on the uninhabited islands?
I mean, not economically. I think if you want to take that as a signal as to the process by which these tariffs were arrived at. It seems to be there was a spreadsheet somewhere and there was equations used and sort of spit out. And there wasn't sort of a review process to see sort of the reality of the situation on the ground and what this would mean and what this... meant.
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