It’s Over: Trump Just Broke The Stock Market

"And beginning today, they are single-handedly changing the entire landscape of our economy from the value of the US dollar, potential trade wars, and a worldwide fallout."

"And I'm not going to lie, this might wind up being a very difficult next few months."

"So, why is this likely to result in a trade war? Well, like I said, the thought process is that tariffs can be beneficial in four main ways. First, they protect US companies from foreign competition. In this case, if imported goods become more expensive, then local companies have a chance to compete with their own products. This leads to number two, increased job growth. When local companies are able to compete, they're likely to hire more workers and sustain a higher employment rate. That leads to number three, higher government revenue. The more jobs hired locally, the more revenue the government can collect in taxes. And even if more jobs aren't created, the government is still collecting additional revenue coming in from the tariffs, which could then result in number four, favorable trade negotiations. Perhaps other countries don't want tariffs on their products because that's going to hurt their own economy. So they negotiate to buy more Americanmade products, resulting in a fair global trade around the entire world."

"However, there is a very big risk to the strategy because, as we're starting to see, other countries are beginning to fight back with reciprocal tariffs."

"So, tariffs just result in number one, higher prices for everyone, especially because most of the companies just pass on the additional cost to the consumer without any guarantee of benefiting the United States. Second, a trade war becomes more and more likely, resulting in a stalemate that just hurts everybody. And that leads to three, less economic growth as people cut back and buy less, which is what we're starting to see."

"As it stands now, economic uncertainty just spiked to levels never seen before on the index."

"US companies cut 275,000 jobs in March, marking the highest number of layoffs since May of 2020."

"And April 3rd was the worst day in the stock market since June of 2020."

"This is partially why Trump said that he's open to trade negotiations and is urging other countries to lower their tariffs on US before hits the fan."

"And when it comes to this, let's take a look at the early 1800s because believe it or not, they had similar tariffs as we have today. Back then, tariffs were implemented to protect US industrial products against competition from foreign imports, and tariffs were increased all the way to 49%. In this case, US manufacturing certainly benefited, but the agriculture industry did not. Over time, this resulted in the reduction of tariffs when individual states argued that they were unconstitutional. And all of this laid the groundwork for the Civil War."

"But instead, the opposite happened. Instead of American products booming, other countries got upset and raised their taxes on US products. That caused a lot of local companies to sell less. They scaled back and many of them went under. On top of that, world trade diminished because many other countries refused to do business with anyone outside of their own border, making the global economy a lot worse off. This meant that people wound up paying significantly more for the exact same items than they did before. And a 100 years later, the Smoot Holly Act was actually credited as making the Great Depression worse."

"Yet, here we are in 2025 implementing tariffs once again, higher than we saw during the Great Depression and at levels we've not last seen since 1828."

"According to the Market Sentiment Blog, who I'm a big fan of, by the way, and I'll link to down below in the description, some of the tariffs implemented don't make any strategic sense. And they gave the example of Taiwan. In 2024, the US imported 116 billion worth of goods and exported 42.3 billion, creating on paper a rather significant trade deficit. But once you begin to zoom out, you'll realize that the United States gave Taiwan $1.5 billion between 1951 and 1965 to build out their economy. We helped them become a leading manufacturer of semiconductor chips that US companies take advantage of. So, it's not out of the ordinary that we buy more from them than they buy from us, especially when they have onetenth the population and 1/3 of the wealth. Or here's another example. Malaysia, their main export is palm oil. Something that we don't even produce and they have no competition whatsoever with the United States. Yet, here we are with a tariff against them."

"So, historically, why haven't tariffs worked? Look, I really want to give full credit to the market sentiment blog for this example because they really said it best. Think of it like this. Mexico makes a hammer for $2 and sells it in the US for $4. If you made the same hammer in the US, it'll cost $6, so no hammers are made. In response to that, the US puts a 300% tariff on hammers. So Mexican hammers now cost $8. This allows the United States to compete and sell its own hammer for $8, thereby making a profit. But now the US consumer pays $8 for a hammer instead of four. Now, sure, people could certainly argue that in that case, United States companies are now able to make a $2 profit and hire domestic labor that otherwise wouldn't have existed, but the extra cost has to come from somewhere. And usually, that's at the expense of everyday items costing more and the market falling to compensate."

"To make matters worse, so far the money collected from tariffs has only helped offset a very, very small amount of our national debt. For example, in 2022, they generated $80 billion for the US government, which was just 2% of all US revenue, enough to keep the government going for just 15 days. That's it. It's also said that personal income taxes in the US raised more than 27 times as much revenue as tariffs in 2021. This pretty much suggests that it'll be impossible to run the US government on tariffs alone."

"In fact, it said that a tariff hike of 69.9% in the level of imports for 2023 seems like it could fully replace individual income tax revenues. But that's not considering any of the fallout of mass layoffs, reduced spending, and less investment, which feasibly makes it a losing proposition, no matter how you look at it."

"Suffered from that, we also just have to acknowledge that other countries sometimes just have the ability to produce items better and more efficiently than we can in the United States. It's why Mexico exports avocados thanks to their soil and climate than let's say Finland where it's too cold. The same applies to coffee beans. There's a reason why the majority of coffee is produced throughout the equator versus Antarctica. It's for these reasons that for a variety of exports it makes sense to create what you have an abundance for and unfortunately a trade war really discourages that."

"But on a broad scale, everything historically suggests that they're a bad idea. They wind up raising prices and having a negative impact on all income groups, and it's best to just allow the market to do its thing."

"After all, most likely this is going to have the biggest impact on the lowest income bracket, costing them 5.5% of their disposable income."

"However, there is something to be argued about using tariffs as a negotiation tactic for more favorable trade deals around the entire world, knowing that other countries have more to lose than we do."

"And as long as this doesn't go on for too long, then it might be effective. But then again, if the rest of the world bands together and refuses to back down, this could get very ugly very quickly."

"This is why the S&P 500 dropped almost 5% in a single day."

"When it comes to tariffs, it's largely outside of your control. There's not much you could do about it. And there's no sense wasting mental energy thinking about what might or might not happen. Instead, you get a much higher ROI simply by living below your means, making sure you keep a consistent income, and having a long-term approach to investing."

"From an investment standpoint, the stock market's best days often happen in a bare market when prices are down the most, and this usually happens after the worst days."

"This is why I'm not trying to time the markets, but instead I'm using it as an opportunity to buy in a little bit cheaper because as long as I'm not planning to sell anything that I have for another 10 or 20 years."

"Honestly, as much as it sucks to be down a ton of money, it's just part for the course. Like, this is normal investing. When you look back over the last few decades, this happens on a consistent basis."

"Study after study shows that if you miss the best 10 days in the market, your return drops substantially. This is the single reason why the average person is such a horrible investor, underperforming just about everything."

"Oh, and lastly, some colleagues of mine are working on a free budgeting software that's meant to replace the likes of mint.com. So, if that sounds interesting to you and you want to be a beta user of it, I'll link to it down below in the description so that when it launches, you can be one of the first people to try it out and share your feedback."