Markets

Fisher: here's what Trump's tariffs chaos teaches investors

Excessive fear compared to reality is expected to continue pushing up equity yields - US tariffs collection agency unable to collect them in full

7 June 2025

Jeremy Allaire, CEO and co-founder of Circle Internet Group, the issuer of one of the world's biggest stablecoins, reacts to the price of first trade, on the day of the company's IPO, at the New York Stock Exchange (NYSE), in New York City, U.S., June 5, 2025. REUTERS/Brendan McDermid

2' min read

The storm of tariffs announced by US President Donald Trump has shaken global stock markets. What will happen? No one knows, perhaps not even him.

In any case, the lesson is clear: trying to predict the timing of markets based on well-known factors is pointless. And the same applies when selling in times of panic. Trump's tariffs are a negative, especially for the US, which is why non-US stocks have been doing significantly better than US stocks since the beginning of the year. However, the fears about tariffs seem excessive, thus fuelling the bullish factor.

Stocks discount widely known news and opinions, and Trump's fixation on tariffs had been known for some time. So why did the Ftse MIB plummet 14.9%, along with the rest of the world's stocks, after the big announcement on 2 April? Simply at first all tariffs, real or threatened, were too limited in scope to create havoc.

But the universal 10% tariffs announced on 2 April and the high 'reciprocal' tariffs turned out to be far more massive and extravagant than anyone could have imagined. The markets collapsed, quickly discounting this madness in prices.

The average tax charged by the EU is 2.7%

Consider that the (currently suspended) 'reciprocal' tariffs have absolutely nothing to do with those applied by other countries to the US. There is no relationship at all. The average tax applied by the EU is 2.7%. Trump has proposed 20%! Vietnam's is 5.1% on average. Trump's is 46%! It all stems from the trade deficit with individual countries, which is perceived as 'cheating'. Which is bizarre considering that the universal tax affects precisely those countries with which the US has a trade surplus.

The trade balance gives no indication of the future. Look at the cases of Germany and France. France has had trade deficits since 2008. And Germany has surpluses. Yet the French economy has fared slightly better. The surpluses of some countries, such as those often affecting Italy, are not a negative factor. The trade balance in itself is not indicative of anything.

And then surprisingly Trump suspended tariffs on 9 April, with the exception of those towards China, claiming that more than 75 countries are willing to negotiate agreements, including the EU, for which Prime Minister Meloni could play an important role.

US agency unable to collect maxi tariffs

But even if tariffs were to be reinstated, their impact would be less than feared. The reason? The US tariffs collection agency is unable to collect the tariffs in full, as it lacks the capacity and processes to deal with such a burden. This is evidenced by the actual revenue collected in April, which was 90 per cent lower than Trump's forecast. And this will continue as companies find other loopholes.

Lawsuits are also pending, as Trump's universal tariffs go far beyond the 'national emergency' grounds he refers to.

And perhaps agreements will be made, which could lower trade barriers with a potentially significant bullish element. There could be strong retaliation, in addition to China, but this seems rather unlikely. And even these could be cancelled out.

So what to do? Excessive fear versus reality should continue to push up global equity returns, albeit unevenly. Patience pays off after panic.

*Executive Chairman of Fisher Investments Worldwide