Tariffs, Tokens, and Turmoil: The Market Fallout from Trump’s Policy Uncertainty
David Krause (Marquette University)
April 2025
This paper investigates the financial consequences of economic policy shifts following President Trump’s second inauguration in January 2025. Using empirical data from April 2024 through April 7, 2025, this study assesses asset performance across U.S. equities, cryptocurrencies, gold, and bonds. The administration’s aggressive trade protectionism, ambiguous digital asset directives, and deregulatory approach to artificial intelligence have triggered heightened market volatility, diminished investor confidence, and a rotation toward defensive assets. Indexed returns reveal that traditional safe havens like gold outperformed riskier assets, while the Magnificent Seven equities and cryptocurrencies have experienced sharp post-inauguration drawdowns. The findings highlight the destabilizing role of policy uncertainty in capital markets, raising critical concerns for investors and policymakers regarding the repricing of political risk. This paper concludes that inconsistent economic governance is contributing to systemic fragility and recommends a more coherent regulatory approach to restore investor trust and improve market efficiency.
Macro Briefing: 25 April 2025
US jobless claims edged higher last week, but remain low. New filings for unemployment rose to 222,000 for the week through April 19, reflecting a stable labor market. Despite concerns for the economic outlook fueled by tariffs, this leading indicator for employment has yet to signal a warning for hiring.
Fed Expected To Keep Rates Steady Despite Trump’s Calls For Cuts
President Trump says he doesn’t plan to fire Federal Reserve Chairman Powell, but the calls for rate cuts continue. The central bank, however, is expected to leave rates unchanged at the next month’s policy meeting. For the moment, it’s still a battle of the unstoppable force vs. the immovable object.
Macro Briefing: 24 April 2025
US economic activity continues to slow in April, according to PMI survey data. Output rose last month at its slowest pace since Dec 2023 via the US Composite Output Index, a GDP proxy. “The early flash PMI data for April point to a marked slowing of business activity growth at the start of the second quarter, accompanied by a slump in optimism about the outlook,” said Chris Williamson, chief business economist at S&P Global Market Intelligence, which published the report. “At the same time, price pressures intensified, creating a headache for a central bank which is coming under increasing pressure to shore up a weakening economy just as inflation looks set to rise.”
US Economy Expected To Post Sharp Slowdown In Q1 Growth
Next week’s initial estimate for US GDP in the first quarter is on track for a sharp downshift in growth, based on the median nowcast calculated by CapitalSpectator.com via several sources.
Macro Briefing: 23 April 2025
The IMF cut its global growth outlook for 2025, citing tariffs as a factor. US output is expected to downshift to a 1.8% increase this year, nine-tenths of a percentage point below the previous forecast in January. “Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments,” the IMF advised in its revised World Economic Outlook. “Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions. Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects. Scaling back international cooperation could jeopardize progress toward a more resilient global economy.”
Tracking Global Markets Since “Liberation Day”
A new world order has emerged in the three weeks since President Trump on Apr. 2 announced “Liberation Day” and rolled out US tariffs. From an investing perspective it’s safe to say it’s been a shock heard around the world, and markets are furiously repricing a new set of risk factors for a radically different outlook for economic activity, financial assets, trade policy, and assumptions about safe havens.
Macro Briefing: 22 April 2025
Gold surged to another record high in Monday’s trading, closing near $3,432 an ounce, and in early trading today it reached $3,500. “As tariff tensions continue to move at a fevered pitch, we continue to see gold prices move to the upside as a safe haven response,” said David Meger, director of metals trading at High Ridge Futures.
Markets Face Another Week Of Extreme Policy Uncertainty
Financial markets are always pricing in uncertainty and risk, but the task has become dramatically more challenging in recent weeks after the US upended its longstanding trade policy. A repeat performance sentiment-roiling activity appears in store for the days ahead as investors wrestle with a series high-stake unknowns.
Macro Briefing: 21 April 2025
China warns countries it will retaliate if governments engage in agreements with the US that threaten Beijing’s interests. “Appeasement cannot bring peace, and compromise cannot earn one respect,” a Chinese Commerce Ministry spokesperson said. “China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will never accept it and will resolutely take countermeasures.” On Friday, China’s Shanghia Stock Exchange Composite Index closed at a roughly middling level relative to recent history.
