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When it comes to the U.S. economy, there are always countless potential outcomes, but when a major policy shift like a trade war begins to take shape, it helps to narrow the focus to a few key scenarios. The tariff war is still in its early stages, but here’s my view on three possible outcomes:
The administration is serious about keeping tariffs in place long-term, aiming to force a return to domestic production. This would likely drive up consumer prices, fuel inflation, and significantly lower the average American’s standard of living. In this scenario, the U.S. could slide into a deep recession, with markets potentially dropping 30–50% in a short time. It’s a textbook case of stagflation — slowing growth combined with rising prices — and it’s painful across the board. No one wins.
This is all part of a larger strategy — a calculated move to create global uncertainty and bring trading partners to the table for better terms and broader concessions. If successful — and resolved quickly, say within six months — we could see interest rates fall in America, recession fears ease, and stronger trade agreements that ultimately benefit American businesses and consumers. In this case, short-term disruption leads to long-term gains. Lots of winners.
The intent is negotiation, but the process drags on for more than a few quarters. Even if it works eventually, the interim damage is done: disrupted supply chains, reduced business investment, and eroding consumer confidence push the economy into a recession before any deals are reached.
In short, it’s messy. Tariffs like these would be devastating if left in place too long, and the uncertainty is unsettling. But I’m cautiously optimistic that this wild ride will reach a resolution sooner rather than later.
I believe Trump’s ego is too big to let his legacy be ‘the president who wrecked the American economy’ — and his own businesses! Remember, at the end of the day, he’s still a businessman and his companies will also be affected.
We can’t begin to predict the next steps, but we remain confident that staying invested, with your required income for the next 5-years held in cash and short term fixed income is the right strategy.
When you zoom out, the markets are back to August 2024 levels, Trump’s tariffs have wiped off 7 months of growth, not pleasing, but not devastating either.
Should you have any questions or concerns remember, we’re here for you.
Warmest regards
Warren
