The President of the United States has no intention of backing down or changing course on his trade policy. The markets don't either. After a dramatic week in Stock Exchanges worldwide, with the two worst consecutive days since the 2008 crisis, but also fatal in currencies, commodities prices, and even cryptocurrencies, with the destruction of over $6.5 trillion just in the Thursday and Friday sessions, everything points to another black Monday in Europe and the US.
The S&P 500 has plummeted 17% from its February highs and is on the verge of entering what is called a bear market. Goldman Sachs raised the chances of a recession in the next 12 months from 20% to 35%, and shortly after from 35% to 45%, specifying that if all promised tariffs come into effect on Wednesday, their base scenario will shift to a certain recession that would force the Fed to change its plans and lower interest rates by up to 2 full points, compared to the 0.50% expected in 2025. And indicators anticipate another day of losses and chaos, with sensations increasingly similar to those of 2008, but with the difference that now the main government involved is not fighting to avoid disaster but pushing towards it.
Over the weekend, Trump, busy with golf tournaments at his Florida resorts, remained silent, completely oblivious or indifferent to the unleashed storm. It wasn't until boarding the plane back to Washington on Sunday night when he said that sometimes to cure an illness, unpleasant medicine is needed. "Tariffs, which are now bringing tens of billions of dollars to the US, are in effect and are a beautiful thing to see. Someday people will realize that tariffs, for the United States of America, are a very beautiful thing!" he stated, doubling down on his challenge.
"I have spoken with many leaders, Europeans and Asians from all over the world. They are dying to make a deal. But I told them we will not have deficits with their country. We will not do it because, to me, a deficit is a loss. We will have surpluses or, at worst, we will reach a balance point (...) I was elected for this. Tariffs next year will make us earn a trillion dollars, in addition to the trillion dollars that thousands of companies are already relocating to the United States (...) It is unsustainable for us to allow China to have trillion-dollar surpluses; we will receive over a trillion dollars in the short term (...) What will happen to the market? I cannot tell you, but I can assure you that our country has strengthened a lot and, over time, it will be a country like no other. It will be the most economically dominant country," the president told reporters aboard Air Force One.
Economic lieutenants of the administration also appeared on all Sunday television programs to try to calm investors and families, ensuring that everything is under control, ruling out that the country is heading towards a recession, that inflation will rise, or that the economy is in danger.
But the outcome was not as desired. Early in the morning in Asia or Oceania, the negative trend set since the White House announced its brutal tariffs for all its trading partners, friends, or foes, has persisted.
Tokyo opened with a 7.35% drop, leading regulators to interrupt futures trading. Sydney suffered losses of 6%, and Hong Kong and Taipei nearly hit double digits at the opening. This was expected because, as highlighted by analysts and investment banks on Saturday, Asian economies are greatly exposed to retaliations between China and the United States, as both are the main trading partners for all. Shares of Taiwan Semiconductor Manufacturing Company, the world's largest chipmaker, fell almost 10%, while Foxconn, the main manufacturer for Apple, dropped over 9%.
In Hong Kong, Chinese tech giants Alibaba, Tencent, and Xiaomi plummeted for the third consecutive day, like Samsung or Nintendo. Stock prices seem to suggest that, directly or indirectly, China has started a discreet devaluation so that the Yuan does not gain too much strength against a weaker dollar.
The focus on Wall Street, which on Thursday recorded the worst day since the onset of the Covid, was not as pronounced, but within the ranges already seen. As trading began, Dow Jones futures dropped by 4.4%; S&P 500 futures by 5%; Nasdaq futures, the tech index, by 5.3%; and Russell 2000 futures by 7%, before momentarily stabilizing around 3%. The slump also hit the crypto world over the weekend, with Bitcoin losing 5% to $77,000, and Ether and Solana dropping almost 10%. Oil also accumulated another 3% decline, as did copper.
In the markets, attention is focused this Monday on which funds are controlling their exits, hedge fund liquidations, and credit default swaps spreads, the famous default insurance that became so famous in the last decade's crisis. They are not at panic levels, but are rising for the most vulnerable or exposed economies and currencies to American trade sanctions.
Also on the cascading consequences, as in this environment, the prospects for major mergers seem scarce, while law firms and banks prepare for potential bankruptcies or collapses. The New York Times reported on Sunday that, just like in 2007-2008, after several black sessions in the Stock Exchange, banks "have asked their clients to provide additional funds if they wish to continue borrowing to operate; 'margin calls,' which are far from the level of a generation ago, continue to generate concern," the newspaper warned. "It was fun while it lasted," wrote Daniel S. Loeb, a hedge fund manager, in X in a post he later deleted.
All this after just two days of pure nerves, during which some of the president's top advisers or supporters have begun to distance themselves from his policies and urge him to backtrack or pause. The first was Elon Musk, the world's richest man, already on his way out of the administration. Musk was not at the White House rose garden on Wednesday when the tariffs were announced, and over the weekend, on his social media X, he openly criticized Pete Navarro, the main ideologue of tariffs in Trump's circle for a decade.
The economist's response, who holds a Harvard Ph.D. and is constantly mocked by the businessman, was straightforward: "We understand what's going on, Elon sells cars," he said, emphasizing that "he is in Texas, where they assemble car parts, many of which come from China, Mexico, or electronic components from Japan or Taiwan. He is a businessman with his interests," he added.
But as if that were not enough, in a talk with members of La Lega, Matteo Salvini's party in Italy, Musk advocated for the EU and the US to drop tariffs and create a free trade zone. An enormous irony given Salvini's few sympathies for free trade, but also because it was Trump, upon taking office after winning the 2016 elections, who dealt the final blow to the TTIP, the agreement that Brussels and Obama's White House were unable to conclude after years of negotiations.
Another who seems to have fallen off the horse is investor Bill Ackman, a Trump supporter who helped raise money for him during the electoral cycle, anticipating a new dawn for the US if Kamala Harris was defeated. In a lengthy post on X, Ackman wrote that "the country fully supports the president in solving a global tariff system that has harmed it. But business is a game of trust, and trust depends on credibility and respect. By imposing massive and disproportionate tariffs on our friends and enemies alike, and thereby launching a global economic war against the world all at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital. I just understood why Howard Lutnick is indifferent to the stock market and economic collapse. He and Cantor have long-term bonds. He benefits when our economy implodes."
"It is a bad idea to choose a Secretary of Commerce whose company has long-term leveraged fixed income. It is an irreconcilable conflict of interest," Ackman lashed out in another message, launching a frontal attack on the Secretary of Commerce, one of the weakest links in the administration and a rival of Treasury Secretary Scott Bessent, another former Hedge Fund executive who is currently downplaying the consequences of the losses generated.
The investor, speaking for many who share the same opinion but remain silent to avoid angering Trump, called for a 90-day pause in the implementation of these measures while a feasible solution is found for all parties involved. "The president has the opportunity on Monday to ask for a break and take the necessary time to correct an unjust tariff system. Otherwise, we are heading towards a self-induced economic nuclear winter, and we should start protecting ourselves," he concluded.