Rapturous applause and a sea of phones in the air greeted President Trump as he walked on stage and declared, “The golden age of America has officially begun.”
He was barely a month into office when the Saudi-backed investor conference in Miami captured the optimism. “The Nasdaq is up nearly 10% in just a few months,” Trump said, ticking through a list of economic indicators. “The Dow Jones Industrial Average is up 2,200 points.” On the same day, Feb. 19, the S&P 500 hit an all-time high.
But as Trump unleashed an on-one-day, off-the-next tariff fight with America’s largest trading partners, those gains unraveled. In just a few weeks, the S&P lost $4 trillion in value driven by his whipsaw trade policy, receding optimism about an artificial-intelligence boom and souring consumer sentiment caused by threats of higher prices and weaker growth. A measure of consumer sentiment fell in March for the fourth straight month to the lowest level since January 2021, the Conference Board, a business-research group, said Tuesday.
Markets in the past week have recovered some losses, but Trump is preparing his next shock: an April 2 “liberation day” suite of reciprocal tariffs he said will be applied on any trading partner that charges tariffs or imposes other trade barriers on U.S. products.
CEOs and lobbyists seeking clarity and fretting over what they see as a haphazard approach have inundated Trump’s team with calls, according to people in the administration. Some of these people said the White House has been receptive to hearing from businesses about their concerns, but they said it’s unclear if arguments for a more temperate and targeted approach have persuaded Trump.
Among other factors, investors were caught flat-footed by Trump’s animus toward Canada, which wasn’t a part of last year’s election campaign. Global markets were then roiled by the fallout from the Oval Office meeting between Trump and Ukrainian President Volodymyr Zelensky , which descended into a shouting match.
The spectacle led Germany to approve a once-unimaginable €1 trillion defense-spending deal—with contracts to go to European makers—in the blink of an eye. The package has sent up yields on German sovereign debt and could reduce appetite on the Continent for U.S. Treasurys.
“At the end of last year, the attitude was, ‘Full on, this is going to be an exceptionally pro-growth agenda and it will be executed in a clear way.’ All of that has gone in reverse,” said Ed Al-Hussainy, global interest-rate strategist at Columbia Threadneedle Investments.
On the campaign trail, Trump repeatedly praised the use of tariffs, calling it the “most beautiful word in the dictionary.” But Wall Street investors and big businesses believed he would ultimately dial back rhetoric, focusing more on boosting growth and using targeted tariffs against China and to support critical industries—something that would hew more closely to his first term.
Now, CEOs who cheered Trump’s tax and regulatory cuts have grown increasingly pessimistic, though many remain reticent to speak out because of fears of public criticism from the administration.
Officials at the Federal Reserve, who last year were heartened by a broad-based easing in price pressures, now expect tariffs to push prices up this year while weakening growth.
Even the president, famous for plowing through bad news, has refused to rule out a recession as he describes a transition period in his quest to upend global trade alliances and reinvigorate domestic manufacturing. “Everything could happen,” Trump acknowledged last week on Fox News.
White House officials said Trump is doing precisely what he promised on the campaign trail and argue that markets will always fluctuate. They said the back and forth on tariffs with Canada and Mexico was related to national security, migration and the fight against fentanyl. They point to other positive economic indicators, including a steady unemployment rate and a recent surge in home building.
“The underlying fundamentals of the economy are pretty darn good,” said Stephen Miran, chair of the White House Council of Economic Advisers, in an interview last week. He said Trump’s policies of tax and regulatory cuts would begin to show dividends, and he maintained tariffs can work. “We are focused on creating the best, strongest economy in American history and the president’s golden age. It’ll take a little more time to get there.”
‘100-year perspective’
The president has already slapped tariffs of 20% on goods from China, 25% on imports from Mexico and Canada that aren’t covered by an existing trade agreement, and 25% duties on steel and aluminum. Additional tariffs on copper and lumber are planned.
Trump inherited an economy with steady growth but vulnerabilities from a frozen housing sector, cooling labor market, richly valued stock market and the aftereffects of several years of high prices. Investors began the year indifferent to those faults because they expected the new administration to focus on revving up growth.
The temporary resolution of tariff threats against Canada, Mexico and Colombia in the first days of the new administration reinforced a false sense of security that Trump would threaten tariffs only to extract concessions, said Marc Short , a longtime top adviser to former Vice President Mike Pence .
Stock losses piled up in the days after Trump touted the market in Miami. Walmart warned that its coming profit would miss analysts’ expectations, and a reading of U.S. consumer confidence sank.
“The reality is you’ve got a brew of sticky inflation, slowing growth and austerity in the government. So I’m actually pretty negative for the first time in a while,” Steve Cohen , chief executive at Point72 Asset Management, said at a separate conference in Miami two days later.
A market selloff accelerated over the next two weeks as Trump and his advisers signaled they were prepared to accept short-term pain to remake a global trading system that has contributed to steady declines in the prices of consumer goods over the past three decades.
“If you look at China, they have a 100-year perspective,” Trump said in an interview on March 9 on Fox News. By the next day, all of the gains in the three major stock indexes since Trump’s election had been erased.
At a Yale event in Washington on March 11 that drew business leaders including JPMorgan’s Jamie Dimon , billionaire Michael Dell and Pfizer’s Albert Bourla , CEOs assembled in the room responded with a mix of groans and shocked laughter after it was announced that Trump was considering doubling tariffs on steel and aluminum from Canada.
Lofty stock prices and steady income growth have been critical engines of the economic expansion in the past few years. A market rout could make the U.S. economy wheeze if it leads high-income consumers to pull back spending.
Investors shuddered earlier this month when the Trump administration dialed up tariff threats and then signaled complacency about recession risks. “Here’s the interesting thing about the stock market: it cannot be indicted, arrested or deported; it cannot be intimidated, threatened or bullied,” wrote JPMorgan’s Michael Cembalest in a report on March 12 that was forwarded across Wall Street trading desks.
Looking for M&A boom
Dealmakers and finance chieftains were among the most excited for Trump.
Last October, before the election, Marc Rowan , CEO of Apollo Global Management told a crowd in Saudi Arabia the Biden administration had been detrimental to deals. “I think there’s an absolute chill on M&A activity as a result of current policy, and I think you will see it freed up if there is a change in regime,” Rowan said.
Deal volume in the U.S. is down 0.7% this year to March 24 compared with the time period last year, according to data from London Stock Exchange Group , a far cry from the surge in activity anticipated by business leaders. Excluding Google-parent Alphabet’s $32 billion acquisition of cybersecurity startup Wiz, deal volume is down more than 9% from the previous year.
Within private-equity firms, the people who actually do the dealmaking were always less optimistic than their firms’ top leaders about a quick return to M&A boom times after Trump’s election. A material decline in interest rates would have a much more meaningful effect on deal volume than a lighter regulatory touch, they argued.
Instead, the Fed has shelved interest rate cuts as it waits to assess the effects of Trump’s policies.
Fed officials believe they are responsible for keeping inflation low and stable over time, and Chair Jerome Powell at a March 19 news conference suggested the central bank had been close to achieving that task until the tariff developments. He referred five times to “tariff inflation.”
The implication: any rise in prices this year would be due to White House policies as opposed to underlying economic conditions.
On Tuesday, Trump said the country was on the right track, though he’d like to see interest rates come down. “You’re going to see billions of dollars, even trillions of dollars, coming into our country very soon, in the form of tariffs,” he said, when speaking to the press at the White House.
At an investor conference in February, Ford Chief Executive Jim Farley said that “a 25% tariff across the Mexico and Canadian border will blow a hole in the U.S. industry.”
Trump tried to reassure the heads of America’s three biggest automakers when they were patched through to the Oval Office for a virtual meeting earlier this month by highlighting his plans to pare back regulations and the electric-vehicle mandate, according to people briefed on the meeting.
That led to an awkward moment when one executive pointed out that none of that would help if tariffs on Mexico and Canada took effect. Tariffs levied on their elaborate cross-border supply chain would cost billions of dollars, obliterating any deregulatory savings.
General Motors Chief Mary Barra recited arguments against tariffs, but also touted GM’s investment in U.S. manufacturing.
Trump steered the talk away from tariffs and toward boosting investments and jobs, according to the people.
Trump said he’d give the executives another month before the tariffs kicked in—but only a month. “He told them that they should get on it, start investing, start moving,” White House press secretary Karoline Leavitt said at the time.
Barra met with Trump in person more recently, according to a person briefed on the meeting, and laid out the company’s plans to invest $60 billion in U.S. operations.
‘Sense of helplessness’
Yet businesses more broadly have been reluctant to hire or invest given the increased uncertainty about the economy and the administration’s policies.
One in three manufacturing firms surveyed by the Philadelphia Fed thought new orders would rise over the coming six months in March, down from two thirds of firms in the same survey in January. The two-month drop in the measure was the largest for any two-month period since the survey began in 1968.
“There’s an overriding sense of helplessness” among executives now, said Sean West, co-founder of the software firm Hence Technologies and the author of a new book on modern business risks. “CEOs are feeling stunned, and they’re not used to feeling like they don’t have good moves.”
The chief executive of Lifetime Brands , which makes products such as S’well water bottles and Farberware cutlery and kitchen tools, lamented the lack of visibility about tariffs in a conference call with investors this month. “It may change tomorrow, it may change completely differently the day after,” said Rob Kay .
Investors had reason to think Trump’s economic team might steer Trump away from such unpredictability. Treasury Secretary Scott Bessent, a hedge-fund investor, one year ago cautioned his clients to treat Trump’s trade bluster as a negotiating stance. “Tariffs are inflationary and would strengthen the dollar—hardly a good starting point for a U.S. industrial renaissance,” he wrote in January 2024.
But his comments have taken a different tone more recently. Bessent brushed aside concerns that tariffs will slam corporate profits and growth. “MAGA doesn’t stand for ‘Making M&A Great Again,” he said on CNBC this month. In the same interview, he dismissed jitters about tariffs by suggesting the U.S. economy might need a “detox period” after years of high government spending.
Trump advisers have sometimes made contradictory arguments, alternately saying tariffs aren’t likely to raise prices and that inexpensive foreign imports of apparel, toys and electronics have been overrated.
Veterans of Trump’s first term have watched with some concern. While waiting for Trump to address a joint session of Congress on March 4, former Trump economic adviser Larry Kudlow told Fox News he “would have preferred a different sequence” for rolling out the economic agenda. “I would’ve said get your tax cuts done first and then go for the tariffs,” he said.
Bessent’s declaration at a luncheon with Wall Street executives this month that the American dream was about more than “access to cheap goods” drew a rebuke from Pence, who said free trade had lifted Americans’ standard of living.
Bessent retorted, “With Vice President Pence, this ‘let them eat flat screens economic policy’ isn’t what people want. They don’t want baubles from China,” Bessent said in a podcast last week.
Short, Pence’s adviser, said Trump’s team risked misreading the electorate’s frustration with the economy under President Joe Biden as a mandate for sweeping change. Bessent might not “worry about the price of everyday goods, but there are a lot of Americans who do,” Short said.
One economist pointed out that the economic damage from tariffs could eventually shift a policy based on the idea that a country can only get rich by exporting more than it imports.
“The president is a true mercantilist and just isn’t going to believe forecasts about how bad this can get,” said Michael Strain , head of economic-policy studies at the right-leaning American Enterprise Institute. “He needs to put his hand to the hot stove and leave it there until he can’t bear it. The question is how long will that take?”
Write to Nick Timiraos at Nick.Timiraos@wsj.com , Alex Leary at alex.leary@wsj.com and Chip Cutter at chip.cutter@wsj.com
