Over Reaction to Tariffs?

Is it possible that stock markets are over reacting to current and threatened tariffs? While tariffs are painful for exporters and importers, there is likely a point at which the stock markets have discounted the worst outcome. I suspect we are close to that point.

In a recent Goldman Sachs survey, market participants had the following forecast for tariff levels (see chart below). The average tariff forecasted at 9.3%.

Would this (effective tax) make it prohibitively expensive to export into the U.S. market. I think not, particularly in light of global currencies being depressed relative to the U.S. dollar. My recent post identified currency misalignment as the crux of the current trade issues.

https://www.mortonir.com/post/too-tariff-or-not-to-tariff

What level might reciprocal tariffs come in at? For Canada and Australia the levels look manageable in the analysis below. The Baltic countries look to be in a world of pain.

If we could get to a place where the threats and unprofessional behavior were minimized, a respectable conversation could take place. One hopes that a certain level of political calmness can be established and that equity markets regain their footing.

regards, Tim

Thoughts? email me.....

tim@mortonir.com