According to a recent analysis, US President Donald Trump’s reciprocal tariffs are a “slow burn” for Wall Street because they rarely cause an immediate crisis but instead distort markets, put pressure on consumers, and encourage retaliation over time.
In an opinion post published in One World Outlook, Zoya Najeeb advises investors and policymakers to keep in mind that just because the storm hasn’t arrived yet, it still has the potential to do so.
“As Wall Street celebrates record-high stock indexes, the US economy is subtly absorbing a painful pill: tariffs. The piece emphasized that the same markets that went into a panic in April are now dismissing the reality of a new trade regime, which may be much more expensive than investors are ready to acknowledge.
Commerce Secretary Howard Lutnick recently predicted that tariff collection would soon reach $50 billion per month, while White House press secretary Karoline Leavitt recently praised the $29 billion collected in July.
“But tariffs are taxes by another name, and this is a tax hike on Americans at a time when the bottom half of the income ladder is already straining,” according to the article.
The additional tariffs could cost Caterpillar Inc., an American manufacturer of mining, construction, and other engineering equipment, up to $1.5 billion this year, including half a billion in the current quarter alone.
However, investor confidence in unrelated expansions in AI data centers and infrastructure spending caused its stock to barely flinch. According to the study, “It’s a nice metaphor for today’s K-shaped economy: Wall Street soars while Main Street witnesses a spike in grocery bills and more households resort to ‘buy now, pay later’ plans just to make ends meet.”
The stock indices may be supported by the AI gold rush, but the S&P 500 is flat when tech is taken out of the equation.
“For 11 consecutive quarters, Warren Buffett, who is hardly a doomsayer, has been quietly selling and building up a $344 billion war fund that he may use should prices decline. Even if the market as a whole isn’t down, he is,” the article stated.
Paul Ryan, the former speaker of the US House of Representatives, has cautioned that “choppy waters are ahead because I think they’re (tariffs) going to have some legal challenges.”
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