Markets Shrug Off Tariffs, Encouraging Trump to Double Down.

 Trump Ramps Up Tariff Threats as Markets Show Little Reaction.

US President Donald Trump

Photographer: Will Oliver/EPA

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Markets Remain Calm as Trump Threatens More Tariffs—But for How Long?

To former President Donald Trump, the soaring stock market is proof that Wall Street supports his aggressive tariff policies. But many investors say the real reason for the rally is their confidence that Trump won’t follow through on his most extreme trade threats.

Despite escalating rhetoric and promises of new tariffs on countries including Canada, Brazil, and Algeria, the S&P 500 continues to notch record highs. Speaking to NBC, Trump said, “I think the tariffs have been very well-received. The stock market hit a new high today.”

However, most traders and analysts disagree. Their belief: Trump’s threats are part of a negotiation strategy, not a signal of imminent policy. That belief has helped markets stay resilient, even amid rising global trade tensions.

“Trump typically starts negotiations with aggressive talk, but the final policy is usually more moderate,” said Patrick Armstrong, Chief Investment Officer at Plurimi Wealth LLP. “The market’s muted response reflects skepticism about a full-scale trade war.”

Markets May Be Underestimating Tariff Risks

Trump sees market strength as an endorsement of his economic stance. But investors remember what happened in April, when a tariff pause coincided with rising Treasury yields and a Nasdaq 100 correction that pushed it into bear territory.

Today, volatility measures are signaling investor calm. The VIX Index dropped to a five-month low this week, and Treasury volatility metrics hit their lowest levels since 2022. Yet that calm could be misleading.

At an event in Dublin, JPMorgan CEO Jamie Dimon warned that markets may be growing too complacent. He suggested that the Federal Reserve might even need to raise interest rates again to keep inflation in check.

Investor Confidence May Be Misplaced

On Friday, S&P 500 futures dipped 0.6%, hinting at a mild market pullback after the index hit another record high. Trump told NBC he is considering broad-based tariffs of 15% to 20% on most trading partners—a move that could reshape global trade dynamics.

Joachim Klement, strategist at Panmure Liberum, believes markets are misjudging the real risk. He warned that even current tariff levels could fuel inflation and squeeze corporate margins.

“This will inevitably hit corporate profits and revenue growth,” Klement said.

Wall Street Still Bets on a Soft Landing

For now, speculative sectors like Bitcoin and AI stocks continue to rally, reflecting investor optimism. According to Bank of America strategist Michael Hartnett, client feedback doesn’t indicate any immediate fear about tariffs, inflation, or stretched stock valuations.

But some analysts are sounding the alarm.

“Markets have priced in perfection—a soft landing and smooth resolution of tariff risks—which feels disconnected from reality,” said Hebe Chen, analyst at Vantage Markets in Sydney. “A pullback is very much on the table.”

Even U.S. Treasury Secretary Scott Bessent urged caution. At a recent conference in Idaho, Bessent reportedly pushed back against the “TACO” narrative—Trump Always Chickens Out—saying the real approach may be closer to the viral acronym “FAFO,” or F--- Around and Find Out.

Looking Ahead: Corporate Earnings in Focus

Despite Trump's social media presence and unpredictable policy moves, many investors say they’ll wait for concrete data. With U.S. earnings season set to begin next week, companies could provide a clearer outlook on economic conditions and the true impact of tariffs.

“Investors shouldn’t react to every tweet,” said Marko Papic, Chief Strategist at BCA Research. “The tariff back-and-forth is designed to accelerate deals and let Trump claim wins along the way.”

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