(Emily Stewart – The Street)
Wall Street doesn’t believe President Donald Trump is as tough on trade as he says.
Market expectations of major trade policy changes under Trump appear to have completely reversed since the former real estate executive was first elected, according to a weekend note from Goldman Sachs. While equity and currency markets initially priced in substantial increases in tariffs on imports to the U.S., they appear to have now almost written the matter off -- so much so that they may now be discounting Trump too much.
“Markets do not appear to be pricing tariff risk, whether it concerns sector-specific or broad tariffs,” analysts Daan Struyven and Ben Snider wrote. “While markets initially likely overestimated the scale of policy changes under President Trump, markets may now be underestimating the odds of policy implementation.”
Trump campaigned on threats to impose tariffs of up to 35% on countries such as Mexico and China and rip up trade deals he deemed unfair. Market indicators show investors largely bought into his rhetoric soon after the election but now appear to think he won’t act. Click here to read more.