4/7/2025

Apr 7

Tariffs

Anyone that has ever played a game of Catan or Civilization understands the basic principles however, for those that have not

They exist to address trade equilibrium and price competition among local markets
For instance you manufacture a product domestically and you may also import a similar product from another country
If the product you import is cheaper than the local production, consumers will pivot towards the cheaper product, this is why tariffs exist as a price stabilization method
In order to get what you need -- lumber, precious metals, nintendo switches, you need to commit to diplomacy and make deals to stimulate your local economy

Most of the USA’s deindustrialization occurred in the 1970s and 1980s where manufacturing domestically became more expensive, and it was essentially easier to use sweatshops and other methods of cheaper labor in “developing” nations
Our rust belt, has rusted

Markets are responding to blanket tariffs initiated by the administration with arbitrary numbers and a formula that doesn’t even make sense
The Trump administration has initiated a trade war that has destabilized the progress of globalization and price points, multiple markets hit the switch to pause trading because they dropped so quickly
The numbers are bleak, economists and ceos are hypocritical and the whole dynamic risks a situation of stagflation

Hedge funds utilize margin trading, which allows them to pledge their stocks to have more stock purchasing power
If the stocks have a larger value, they have more leverage
If stocks crash, they need to liquidate their positions to cover their cost basis and what is called their “margin calls”

The S&P 500 was down 1.4% in midday trading, coming off its worst week since COVID

Markets now expect four quarter-percentage-point interest rate cuts from the Fed this year versus three

This is theoretically to encourage speeding, however increasing the money supply also increases inflation making life more expensive for the average American

Sources:

4/21/2025