Tariffs represent a significant shift in U.S. trade policy that might be transformative.
Well, the merits of these new trade policies are being debated vigorously around the world, in political circles and on investment trading desks. However, the last couple of weeks news has left me confused and asking questions. Perhaps the most important question on my mind is a broad one…have we entered a new economic paradigm?
The Trump tariffs represent a significant shift in U.S. trade policy and could contribute to the emergence of a new economic paradigm—one marked by a departure from decades of globalization and free trade orthodoxy. Whether they will fully usher in this paradigm or simply accelerate an existing shift is still up for debate, but several key points suggest the Trump tariffs will play a transformative role:
- From Free Trade to Strategic Protectionism
For much of the post–World War II era, the U.S. has championed free trade through multilateral institutions like the WTO and agreements such as NAFTA. The Trump tariffs signal a sharp break, reintroducing protectionist tools to:
- Protect domestic industries (e.g., steel, auto and aluminum)
- Punish unfair trade practices, particularly by China.
- Reduce trade deficits.
This approach will surely reflect a broader trend toward economic nationalism, where strategic sectors are prioritized over efficiency-driven global supply chains.
- A Reframing of China Policy
Tariffs on hundreds of billions of dollars in Chinese goods will not be just economic tools—they will be part of a broader geopolitical reorientation. The U.S. has begun to:
- Treat China as a strategic adversary rather than an economic partner.
- View dependency on Chinese manufacturing as a national security risk.
In fact, I would argue that this shift took hold during the first Trump administration (2017-2020) and was carried over by the Biden Administration. The last years reinforce the notion that there is a building, bi-partisan consensus on “decoupling” or “de-risking” from China.
- Normalization of Industrial Policy
The Trump tariffs could help normalize active government involvement in shaping the economy. Earlier policies (such as the CHIPS Act and Inflation Reduction Act under Biden) were examples of this potential trend. However, this is a disturbing trend for free-market types, and I worry that there may be new and large government subsidies aimed at:
- Domestic manufacturing
- New energy production
- Technology
The ultimate effectiveness of these tariffs in achieving freer markets and fostering economic growth remains uncertain, as they have sparked a complex mix of negotiation opportunities and economic challenges. Moreover, it may take a long time for the U.S. to realize the desired benefits of this approach in the form of more open and fair trade.
Strategy and Management Overview
Here are some important points to keep in mind currently. A stock market drop of 20% or more in a short period—often referred to as a bear market—isn’t super common, but it’s also not rare.
Here’s a breakdown:
Historically, in the U.S.:
- The S&P 500 has fallen 20% or more about once every 6–10 years on average.
- Since 1928, there have been about 15–20 bear markets, depending on how you define “short period” (often weeks to a few months).
Using history as a guide, I now believe that a tremendous investment opportunity has emerged. For those investors that operate with a long-term perspective, this environment presents the potential to acquire high-quality assets at significantly discounted valuations.
The Wealth Group manages portfolios by setting strategic equity exposure targets aligned with each client’s investment objectives and risk tolerance. These targets guide our decisions to maintain disciplined, long-term asset allocation.
When equity markets perform well and the value of equities in the portfolio rises above the target allocation, we take a proactive approach by selling a portion of the equities. This locks in gains and rebalances the portfolio back to its intended allocation, helping to manage risk and avoid overexposure to equities.
Conversely, when equity exposure falls below the target—typically due to market declines—we view this as a buying opportunity. We will purchase equities to bring the portfolio back in line with its strategic target, allowing clients to buy at lower valuations and maintain consistent exposure to growth assets.
This disciplined approach to rebalancing ensures that we are not reacting emotionally to market fluctuations, but instead following a systematic strategy designed to support long-term investment success. And as always, we will be focused on the risks that are in front of us, and we will be searching for ways to exploit those opportunities that may surface.
The opinions expressed are for general information only and are not financial, investment, legal, or tax advice. Seek professional advice tailored to your circumstances before making any decisions.
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