Clarity on tariffs can’t come soon enough for investors

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The United States market decline that began a month ago is the product, mainly, of worries about the economic policies of the administration of U.S. President Donald Trump. That much is universally agreed. There is less agreement about how much of the problem is the prospect of policies that will diminish corporate earnings, and how much is the total lack of clarity about what, exactly, the policies will be.

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Several times in the past few days, Wall Street people have told me their clients were hoping that the fog might clear on April 2, the day the administration has picked to announce both reciprocal tariffs on countries and sector tariffs on strategic industries.

Will we get policy clarity in two weeks’ time? Or will the mess only get messier? In the short term, there is no more important determinant of the market outlook.

Thierry Wizman of Macquarie Group articulated investors’ hopes in a note yesterday (italics mine): “With the new U.S. trade representative (USTR) Jamieson Greer taking office … there is renewed hope that there will be more regularization and rationalization of the U.S. administration’s import tariff policies and program, as well as an impetus for more negotiation with trade partners. We believe that ‘peak chaos’ with regard to tariff policy is behind us…

“The new USTR was reported to be likely to create a formula for a single rate for each country, based on that country’s average tariff level, as well as other measures the Trump team considers discriminatory. … Those tariff rates would not be static, and could be adjusted based on whether a country has been co-operative in reducing its tariff rates. We think that this signals a new flexibility.”

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I spoke to Wizman yesterday and it is important to note that he thinks significant ambiguities may remain after April 2. But he does believe that a more regular, predictable, conventional policy process may take hold soon. His reason is that the administration, whatever it may be saying, knows that the policy chaos is doing real damage. And he is encouraged by hints in recent news stories that a new approach is taking shape.

On Monday, Bloomberg wrote of Greer: “President Donald Trump’s top trade negotiator is attempting to inject order into sweeping new tariffs expected next month. … Through the past two months of tariff chaos … Greer has largely been out of the picture. … Under Greer, USTR has reinstated parts of a traditional policy process that were missing from prior tariffs imposed on Canada, Mexico, China and metals by asking for public comment on the reciprocal duties. That gives the trade office a formal way to receive feedback from businesses and other stakeholders.”

Most importantly, the article noted that officials such as Scott Bessent and Kevin Hassett “have expressed an urgency to move on to tax cuts and regulation rollbacks that investors crave.” This all sounds quite promising for fans of order, predictability and profit.

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And, yesterday, The Wall Street Journal reported that the White House was inching toward a plan (the concept of a plan?) for reciprocal tariffs. A three-tier approach, designed to avoid the picky business of country-by-country, product-by-product rule writing, was considered and discarded, in favour of an “individualized approach” with “more flexibility.” How to convert tariffs, non-tariff trade barriers, industrial subsidies and currency controls into a single tariff rate for each U.S. trading partner is under discussion now. Meanwhile, additional 25 per cent tariffs on cars, semiconductors and pharmaceuticals are planned.

Yesterday morning, Treasury secretary Bessent appeared on television with clear intent to reassure. He confirmed that each country would face an individual tariff rate, and emphasized U.S. willingness to negotiate: If partner countries removed trade frictions, tariffs would come down. For strategic industries, the tariffs would remain. He also noted that there were 15 countries with whom the U.S. ran big deficits that were the focus of the administration’s attention (“the dirty 15”).

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The administration is trying to transmit clarity, directly and indirectly. But there is no concealing the remaining ambiguities.

Bessent did not provide much clarity on which industries, besides steel and aluminium, the administration considered strategic. Whether or not the list includes pharmaceuticals, for example, will make a big difference to markets; it has been widely assumed that drugs will be carved out, as they often have in the past. And when pressed on whether tariffs would be “stacked” — if reciprocal tariffs would come on top of strategic ones — he equivocated, and said the trade representative and commerce departments were in charge.

Which leads to the two overarching questions. First, can this administration fall into line behind a single plan, as orchestrated by Greer or someone else? And how will other countries respond, what will the mix of negotiation and retaliation be? These responses will play out over time, but investors need a road map from the U.S. side at the outset.

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