To our clients —
New tariffs announced by President Trump yesterday evening have hit stocks hard, with overseas markets off in the 2-3% range and the S&P 500 down more than 3% at the open. The tariff numbers and their breadth, even eliminating traditional exemptions on day-to-day items such as bananas and coffee, proved to be a downward surprise for investors.
The new plan includes a 10% across-the-board surcharge along with additional increments on essentially every U.S. trading partner. This includes 34% on China (added to the existing 20%), 20% on the European Union, and 24% on Japan. The overall weighted world tariff thus ramps up to 23%, up from 10% previously and 2.5% in 2024. Dollarwise, estimates put the annual intake to the U.S. Treasury at $600 billion, paid for by U.S. importing companies and likely passed in meaningful part on to U.S. consumers of a very wide range of products. Inflation estimates, long in the 2.5-3.0% range, now are moving above that.
Diversified Thayer portfolios will be impacted. Going into today, they were generally flat if not slightly higher for 2025. The S&P’s 3.4% year-to-date decline before today has been offset (so far) by gains in non-U.S. stocks as well as bonds.
Our sense is that today will be one for the full shock from the Trump announcement, and then markets will sort out what it means in reality and whether deals will be made. Perhaps some of the most draconian tariffs could be rolled back under political and market pressure, as indeed the slim Republican House majority could come under greater threat in the 2026 midterms.
The irony is that Trump’s thesis for the largest tariffs in 100 years is that the U.S. has been ripped off and taken advantage of in recent decades….yet the U.S. has been utterly dominant on the world stage in terms of economic and corporate performance. In the 15 years ending 12.31.24, the S&P 500 crushed the competition, gaining 13.65% on an annual basis while non-U.S. (EAFE) markets gained a relatively dull 5.25%. Cumulatively, this is 682% versus 215%, or $100 turning into $782 here versus only $315 elsewhere, just under 8x versus just over 3x. Eight of the top ten valued (all trillion dollar plus) companies have been created here. None of this feels like a rip-off.
We’ll be back as events dictate.
David Beckwith, Chief Investment Officer
Tariffs and Market Reaction
To our clients —
New tariffs announced by President Trump yesterday evening have hit stocks hard, with overseas markets off in the 2-3% range and the S&P 500 down more than 3% at the open. The tariff numbers and their breadth, even eliminating traditional exemptions on day-to-day items such as bananas and coffee, proved to be a downward surprise for investors.
The new plan includes a 10% across-the-board surcharge along with additional increments on essentially every U.S. trading partner. This includes 34% on China (added to the existing 20%), 20% on the European Union, and 24% on Japan. The overall weighted world tariff thus ramps up to 23%, up from 10% previously and 2.5% in 2024. Dollarwise, estimates put the annual intake to the U.S. Treasury at $600 billion, paid for by U.S. importing companies and likely passed in meaningful part on to U.S. consumers of a very wide range of products. Inflation estimates, long in the 2.5-3.0% range, now are moving above that.
Diversified Thayer portfolios will be impacted. Going into today, they were generally flat if not slightly higher for 2025. The S&P’s 3.4% year-to-date decline before today has been offset (so far) by gains in non-U.S. stocks as well as bonds.
Our sense is that today will be one for the full shock from the Trump announcement, and then markets will sort out what it means in reality and whether deals will be made. Perhaps some of the most draconian tariffs could be rolled back under political and market pressure, as indeed the slim Republican House majority could come under greater threat in the 2026 midterms.
The irony is that Trump’s thesis for the largest tariffs in 100 years is that the U.S. has been ripped off and taken advantage of in recent decades….yet the U.S. has been utterly dominant on the world stage in terms of economic and corporate performance. In the 15 years ending 12.31.24, the S&P 500 crushed the competition, gaining 13.65% on an annual basis while non-U.S. (EAFE) markets gained a relatively dull 5.25%. Cumulatively, this is 682% versus 215%, or $100 turning into $782 here versus only $315 elsewhere, just under 8x versus just over 3x. Eight of the top ten valued (all trillion dollar plus) companies have been created here. None of this feels like a rip-off.
We’ll be back as events dictate.
David Beckwith, Chief Investment Officer