International stock markets were on Friday under huge pressure. On Monday, the situation remained tense. European markets have once again noted significant declines, and prices for Wall Street behaved like a mountain queue.
Economists from Yale predict that prices for citizens in the US will increase by 2.3 percent. in the short period. In the long run, the US economy will shrink by 0.4 to 0.6 percent.
Meanwhile, Tuesday's session at Wall Street has brought a relaxation after large declines in the last three days. Indexes interrupted the terrible series and started the day with large increases. Improvement of moods is also visible in Europe.
What does all this mean also for us? Here are five comments that should help us understand the situation. One scenario also scares Donald Trump himself.
Like all prices managed by the state, tariffs are not a divine decree, but the invitation of producers to act. They can alleviate the increase in prices – for example by changing their purchasing policy, improving the cost situation and even transferring the country of production.
However, they can also accept a decrease in the profit margin to avoid transferring a new price directly to customers. It depends on these business decisions whether the calculations of the Yale University regarding the loss of income by American consumers will become a reality, or whether they will prove to be a fantasy.
Products are not only duties
Dutch is a price component, but never decisive. For example – according to an analysis carried out by the Fuer Automobilwirtschaft (IFA) Institut, material costs constitute an average of approx. 43.5 percent. car production costs. The share of labor costs in the case of Volkswagen vehicles produced in Germany is responsible for less than 17 percent. costs.
In the case of vehicles produced in Germany and exported to the US, theoretically, an additional 27.5 percent will apply. It would be a significant amount. However, the increase in prices of this size cannot be fully transferred to customers. Therefore, German producers will give up the margin of profit on the American market – or, like Audi, for now withdraw from the market.
The stock market uses emotions related to duties to implement profits
Great investors are expert in using political events to justify their investment policy. Because no fund manager would never admit that their fantasies about artificial intelligence were exaggerated, and the purchase of Nvidia, Microsoft and Apple resulted from the herd instinct, They use emotions related to customs tariffs to reduce their risky positions.
Therefore, in particular, the actions of technology companies, which were previously a boom motor, lose their value because speculative air escapes. Investors are currently withdrawing from the stock market and investing funds on cash accounts or on the bond market. They are looking forward to the next wave of speculation.
The tariff poker is not over, it continues
All forecasts regarding the impact of Trump's customs tariffs on global growth and the American economy course are highly speculative. This is due to the fact that we only know his previous moves, but we do not fully know the moves of his competitors – both China and Europe.
Ursula von der Leyen focuses on negotiations and proposes a duty free trade zone for industrial goods. Elon Musk also brought it to the game as an idea for a peaceful solution to the trade conflict. On the other hand, Trump rejects this proposal as insufficient. The White House waits for the countries affected by Trump's tariffs. The Secretary of Agriculture Brooke Rollins says in CNN that over 50 countries have already reported to the White House for negotiations.
The spectrum of inflation also terrifying Trump
Customs and counterproof mean price increase. The American duties “will probably lead to an increase in inflation and make many believe that the recession is more likely,” wrote Jamie Dimon, president of JPMorgan, in a letter published on Monday to shareholders.
However, this would be the worst scenario for Trump, who calmly talked about “bitter medicine” in the face of Wall Street share prices. First, he would lose the reputation and perhaps the majority in the Senate and the House of Representatives in the middle of the term in 2026. This thought can convince him to surrender.
Conclusion: In these hot days it is advisable that citizens and investors remain calm. Warren Buffett knows that stability is rewarded on the stock exchange, and the stock exchange is to transfer money from active to patients.
