Transcription
Hello, this is Dr. Grande. Today, I will analyze the tariff-induced stock market slide of April 2025. I'll also talk about the panic selling that is occurring right now.
First, I'll look at the background of this case, including the timeline of the incident, then offer my analysis. On Wednesday, April 2, 2025, Donald Trump announced sweeping tariffs for goods imported from about 90 countries. There is a universal 10% tax on most imported goods, as well as an additional import tax which was separately calculated for each of over 50 of the countries affected. Certain goods are not included in these tariffs; for example, steel, aluminum, automobile, and automobile parts have a 25% tariff.
Trump justified this move by claiming the trade deficit is unacceptable. In 2024, it was $1.2 trillion. There's an absence of reciprocity in trade relationships; other nations have been taking advantage of the United States. Again, this is according to Trump. They are cheating the US, stealing manufacturing jobs, and manipulating currency. Trump said it was time for a liberation day. His affinity for tariffs is nothing new; since the 1980s, he has been talking about tariffs as a tool to regulate trade, insisting that other nations are ripping off America. Trump wants foreign nations to manufacture goods in the United States; this way they will not be subject to a tariff.
The tariffs that Trump announced were greater than stock market analysts expected. They are the highest tariffs in the US in about 100 years. Experts predict that prices will increase under these tariffs, and the growth of the US economy will slow. There's a lot of fear about a decrease in corporate earnings.
On Thursday and Friday after Trump's tariff announcement, the stock market slid dramatically. All major indexes dropped more than 9% over the two days. The S&P 500 lost almost 6% on Friday alone. Stock values dropped by $5 trillion, the largest two-day loss of shareholder value ever recorded. Again, this is dollar value, not percentage. The largest percentage drop in two days happened on October 28 and 29 of 1929. This was the catalyst for the Great Depression, according to JP Morgan. There is now a 60% chance of a recession in 2025 if this trade war continues.
Now moving to my analysis. Arguably, Trump has declared a trade war on the entire world. Is this a good idea, or will it lead to disaster? Let's take a look at the factors both for and against the idea that Trump's tariff plan makes sense. Starting with the factors that support this theory: the United States is $36 trillion in debt. Whatever the country is doing, it is not working; the debt is growing. At some point, there will be no way to pay it back; a default will be disastrous for the economy. Part of the reason for the debt can be explained by the country's failure to produce anything anymore. Since 2000, the US has lost over 5 million manufacturing jobs. These jobs went overseas; many went to China because they can manufacture goods cheaper than the US. It's not fair or sustainable that the United States imports more goods than it exports. In theory, tariffs can bring manufacturing back to the United States and balance the trade deficit. Many economists argue that the tariffs will not do this, but here we see a counterargument from those who support Trump's plan. They argue the tariffs can be successful indirectly by bringing countries to the bargaining table. Maybe Trump put the tariffs in place simply to intimidate other nations, knowing the US was a trading partner they could not afford to lose. This theory is supported by something Trump told the media on Air Force One. He said, quote, "Every country is calling us; that's the beauty of what we do; put ourselves in the driver's seat. If we would have asked these countries to do us a favor, they would have said no. Now they will do anything for us."
Now moving to the factors that contradict the theory that Trump's tariff plan makes sense: Trump's tariff is essentially a tax on US consumers. People already pay income tax; now they must pay this tariff as well. This will cost the average household $3,800 a year. These tariffs will cause inflation and slow economic growth. Panic caused by the rollout of the tariffs has devastated the stock market. Sometimes when people panic about a recession and sell equities, it becomes a self-fulfilling prophecy. It's hard to be confident about the future in the unstable environment created by Trump. Retirement plans are based on reaping the benefits of owning stock. The massive slide in the stock market wiped out retirement funds, which will prevent people from retiring. This will put a strain on the job market. Despite Trump's claims to the contrary, his tariffs are unlikely to eliminate the trade deficit. It is difficult for companies to quickly adjust to producing goods in America; the tariffs will put them out of business before they can open factories in order to escape the tariffs. To use an analogy from the movies, it's like when a superhero is trying to figure out how to neutralize a monster while the monster is chasing him. It would be a lot easier to figure out how to defeat the enemy in a calm environment, like the Batcave. Even though many Americans do not like the idea of the large trade imbalance with China, 75% of Americans are better off due to the trade policy over the last 25 years. The problem is the benefits of globalization were not evenly distributed; certain communities were devastated, especially those dependent on manufacturing. This is not entirely the fault of the trade policy; most of those jobs were lost by advances in automation. A tariff will never bring those jobs back.
When considering all the factors in this case, do I believe that Trump's tariff plan makes sense? While it can be argued that at least Trump is trying to do something to balance trade when other leaders have not done anything, his tariff plan is not logical and will almost certainly fail. I think his plan is going to backfire catastrophically. This probably wouldn't matter too much if Trump had a typical personality. A normal person in his position would just do away with the tariffs once he realized they were not going to work. Unfortunately, Trump is too grandiose and arrogant to ever admit that a plan of his was unsuccessful. I think he is going to commit to his failing strategy 100%. People wonder if Trump is willing to destroy the world economy to protect his ego. The answer is yes.
Having a narcissist in a position of power comes with a few positives and many negatives. On the positive side, narcissists often have grandiose plans, which can get a lot of people excited. They attract attention and can motivate people to take on massive projects that normal people would never attempt. When they win, they win big; sometimes taking a big risk does actually pay off. On the negative side, narcissists only look out for their own self-interest. Their decisions are not driven by logic; rather, they make moves that protect their fragile ego. Anything or anyone can be sacrificed to meet this goal. Trump tries to intimidate and destroy anyone who criticizes him. He has surrounded himself with people who do not have a strong enough sense of self to stand up to him. They have been racked by fear and confused by loyalty. They are telling Trump what he wants to hear, which is only one thing: his ideas are perfect with a zero chance of failure.
Even if Trump is somehow successful with his tariff plan, and he could be, the way he went about trying to eliminate the trade imbalance is clumsy, callous, impulsive, irresponsible, reckless, immature, petty, and vindictive. There was no need to roll out massive tariffs all at once. There was no need to bully other nations into negotiations. Trump could have accomplished all his goals gradually, in an orderly fashion. He chose not to because he wants a massive, dramatic, and undeniable victory, which will elevate him to the greatest president in history. This victory must be achieved swiftly so people will attribute the benefits to him. This is all about seeking attention, glory, and credit. Trump is determined to prove he is superior to every other US president, no matter what the outcome of the tariff debacle. How can Americans trust someone who is this reckless? If he is willing to destroy the world economy, what is he willing to do next?
As far as how all this will end, what would it take to make Trump back off his tariff idea? Some people believe that if the stock market drops enough, Trump will abandon his plans. I would be surprised if he did. I think he will only back off if one of two things happens: he looks like a winner by removing the tariffs, or Republicans stand up to him and force him to change course. With the first one, looking like a winner, this would involve each country affected by these new tariffs bargaining with Trump and letting him feel like he accomplished something in the negotiations. They could tell him how great he is and explain how he was right by putting the tariff in place; they learned their lesson. What can they do to make him happy? Many world leaders would get physically sick using this tactic, which is fully understandable. With the second solution, the Republicans standing up to Trump, this will happen when their constituents start pressuring them. When the public turns on Trump, skyrocketing prices will lead to that outcome. US citizens are not going to tolerate this tariff nonsense if they can't pay their bills.
Now moving to the last question: what is the best strategy for dealing with the slide in the stock market? Is it time to panic and sell all equities? In the long run, the stock market has always outperformed other forms of investment, like bonds and certificates of deposit. When people pull their money out of equities worried about a possible recession, they lock in their losses. They are turning an unrealized loss into a realized loss. They are selling their stock for a low price because they are afraid the price will get even lower in the future, and they are worried about decreased dividends. Most investors are in the stock market for the long run; as I mentioned, retirement plans are based on owning stock. What we have learned from statistics on the stock market is that the best plan for making money in the market is staying the course. Panic selling is almost always a bad idea. In the case of this panic, investors are selling stock and companies that are still performing pretty well. Many key economic indicators are still good; for example, employers added more jobs in March 2025 than expected. For these investors who are panicking, this is all about predicting the future. They are confident that things are going to get worse. The problem is that predicting the future is impossible; nobody knows what's going to happen next. Things could get worse with the market, or things could get better. These panicking investors are taking their money out of the stock market and putting it someplace where they think they can preserve it until market conditions improve; for instance, they might move the money into bonds or just keep it in cash. These investors know that in the long run, stocks are the only way to go; there is no substitute for the equities market. They will be forced to jump back into the market at some point. Their plan is to time the market, jump in at the perfect moment, right as the market goes back up. In reality, this almost never happens. Investors who sell in a panic lose money. The vast majority of these investors who are selling right now and driving the price of equities down will regret their decision. They have taken this tariff situation, which may or may not cause a global financial disaster and definitely caused a personal financial disaster for themselves.
Historically, the stock market has the best return in the long run; however, equities come with one massive drawback: that is, the price of admission is volatility. Share prices go up and down. The stock market can experience good days and bad days, good weeks and bad weeks, good years and bad years. There have been long periods where investors made tons of money and droughts where it seemed like the losses would never end. Warren Buffett summed up the most effective strategy for managing equities when he said, quote, "Be fearful when others are greedy and be greedy when others are fearful." The stock market rewards patience and punishes panic. Emotional investors lose money; disciplined investors are rewarded. Selling in fear leads to buying back in regret. Panic is an incredibly powerful motivator, which shifts wealth from those who are influenced by it to those who are not.
Now moving to my final thoughts: one of the most powerful tools that a narcissist has is their ability to convince people that they know something that others don't know; like they have some ability which makes them vastly superior to anyone else. They are special; they can do things that ordinary people cannot do. People should look up to them and trust them due to this amazing, magical, and often non-existent ability. Overconfidence, arrogance, and charisma combined to give a narcissist this power of manipulation. Now, some people do have amazing talents or abilities, but most of the time when a person brags about how incredible they are, they are not really incredible at all.
Donald Trump may or may not be correct with his tariff strategy; I don't think he is, but there is no way to be certain. One thing, however, is certain: Trump does not have some supernatural power that gives him more knowledge about economics than people who have studied that field for their entire careers. Many economists have rejected Trump's plan because it deserved to be rejected based on the science. Trump refused to listen to their advice, insistent that his otherworldly, deity-level knowledge will prove all the experts wrong. Those are my thoughts on the Trump tariff plan. Thank you so much for watching.