logo
episode-header-image
Dec 2024
3m 39s

What Investors Should Know About Trump’s...

MORGAN STANLEY
About this episode

Our Global Head of Fixed Income and Thematic Research explains why President-elect Trump’s proposed tariff plans may look different than the policies that are ultimately put in place.


----- Transcript -----


Welcome to Thoughts on the Market. I’m Michael Zezas, Morgan Stanley’s Global Head of Fixed Income and Thematic Research. Today on the podcast I'll be talking about what investors need to know about tariffs.

It’s Wednesday, Dec 4, at 2 pm in London.

There’s still over a month before Trump takes office again. But in the meantime he’s started sending messages about his policy plans. Most notably, for investors, he’s started talking about his ideas for tariffs. He’s floated the idea of tariffs on all imports from China, Mexico, and Canada. He’s talked about tariffs on all the BRICs countries unless they publicly dismiss the idea of pursuing an alternative reserve currency to the US dollar. In short, he’s talking about tariffs a lot.

While we certainly don’t dismiss Trump’s sincerity in suggesting these tariffs, nor the ability for a President to execute on tariffs like these – well, mostly anyway – it’s important for investors to know that the ultimate policies enacted to address the concerns driving the tariff threats could look quite different than what a literal interpretation of Trump’s words might suggest. After all, there are plenty of examples of policies enacted on Trump’s watch that address his concerns that were not implemented exactly as he initially suggested.

The Tax Cuts and Jobs act is a good example, where Trump advocated for a 15 percent corporate tax rate but signed a bill with a 21 percent tax rate. Another is the exceptions process for the first round of China tariffs, where some companies got exceptions based on modest onshoring concessions. These examples speak to the idea that procedural, political, and economic considerations can shape policy in a way that’s different from what’s initially proposed.

This is why our base case for the US policy path in 2025 includes higher tariffs announced shortly after Trump takes office; but with a focus on China and some exports from Europe; and implementation of those tariffs would ramp up over time, as has been suggested by key policy advisors. There's broad political consensus on a stronger tariff approach to China, and there’s already executive authority to take that approach. Something similar can be said about Europe, but with a focus more on certain products than across imports broadly. However, we see scope for Mexico to avoid incremental tariffs through negotiation. And a global tariff via executive order risks getting held up in court, and we’re skeptical even a Republican-controlled Congress would authorize this approach.

Of course we could be wrong. For example it's possible the incoming administration might be less concerned about the economic challenges posed by a rapid escalation of tariffs. So if they start quicker and are more severe than we anticipate, then our 2025 economic projections are probably too rosy, as are our expectations for equities and credit to outperform over the next 12 months. The US dollar and US Treasuries might be the outperformer in that scenario.

So stick with us, we’ll be paying attention and trying to tease out the policy path signal from the media noise from the new administration.

Thanks for listening. If you enjoy the show, please leave us a review wherever you listen to podcasts and share Thoughts on the Market with a friend or colleague today.

Up next
Today
Are Foreign Investors Fleeing U.S. Assets?
Our Chief Cross-Asset Strategist Serena Tang discusses whether demand for U.S. stocks has fallen and where fund flows are surging. Read more insights from Morgan Stanley.----- Transcript -----Serena Tang: Welcome to Thoughts on the Market. I’m Serena Tang, Morgan Stanley’s Chief ... Show More
4m 56s
Yesterday
How AI Is Disrupting Defense
Arushi Agarwal from the European Sustainability Strategy team and Aerospace & Defense Analyst Ross Law unpack what a reshaped defense industry means for sustainability, ethics and long-term investment strategy.Read more insights from Morgan Stanley.----- Transcript -----Ross Law: ... Show More
9m 33s
Jul 7
Have U.S. Consumers Shaken Off Tariff Concerns?
The American consumer isn’t simply pulling back. They are changing the way they spend – and save. Our U.S. Thematic and Equity Strategist Michelle Weaver digs into the data. Read more insights from Morgan Stanley.----- Transcript -----Michelle Weaver: Welcome to Thoughts on the M ... Show More
4m 15s
Recommended Episodes
Apr 3
Trump Tariffs: Everything You Need to Know
This is a special edition of the Bloomberg Daybreak: US Edition podcast.      Subscribe to the show:      on Apple: http://bit.ly/3DWYoAN      on Spotify: http://bit.ly/3jGRYiB      Anywhere: http://bit.ly/3J1bct9 On today's episode:      President Donald Trump imposed the steepe ... Show More
21m 40s
Dec 2024
Can Trump's Tariffs Work?
In today's video we examine Donald Trump's plan to rebalance global trade using tariffs, try to understand the issues with international trade that have been pushing the United States and other countries in this protectionist direction, and if tariffs can be expected to improve t ... Show More
24m 25s
Apr 23
Trump Considers Slashing China Tariffs
P.M. Edition for April 23. We exclusively report that President Trump is considering cutting steep tariffs on Chinese imports, a move that could de-escalate the trade war. WSJ chief China correspondent Lingling Wei tells us what that means for the broader relationship between the ... Show More
13m 30s
Apr 11
Trump's Tariff Gamble EXPLAINED with Chamath
YERRR BONUS EP - the guys needed to get a breakdown of what was going on in the financial world so they brought in Chamath Palihapitiya from the All-In Podcast to explain to us what's going on with the tariffs, the economy, Trump and much much more. INDULGE 00:00 Rant! 00:43 What ... Show More
1h 36m
Nov 2024
11-21-24 Will Trump Tariffs Be Inflationary
A preview of risks on the horizon, including Trump Tariffs, interest rates, and how debt and deficits are economic drivers. What are the effects on corporate profitability?Will valuations be problematic next year? Lance revews Nvidia's stellar quarterly report and analysts' expec ... Show More
45m 58s
Apr 18
Mark Dow: Tariffs, Trade, and Trump - [Making Markets, EP.59]
My guest today for the second time is Mark Dow. Mark is one of my favourite thinkers on Macro, and his experience at the IMF, the US Treasury, and Wall Street gives him a truly unique perspective for the current moment. As we went through one of the biggest market and policy uphe ... Show More
53m 20s
Jan 2025
Trump’s Tariff Wars
At a White House press briefing on Tuesday, the Trump administration maintained that it would impose a 25 percent tariff on imports from Mexico and Canada on Feb. 1. This comes after announcing a 10 percent duty on China earlier in the week. Trade and capital expert Brad Setser i ... Show More
49m 19s
Apr 7
Trump's Tariff Triumph-Polls Show Rising Approval on Trade
Trump's Approval Ratings: Despite the media's negative portrayal, Trump's job approval ratings rose during the tariff week, with significant increases among young voters, independents, Democrats, and black voters. Tariff Impact: The document argues that tariffs are working, with ... Show More
28m 28s
Apr 23
Will tariffs lead to a recession?
The Trump administration’s tariff moves are turning US trade policy on its head — and fueling concerns about the US economic outlook. So will tariffs send the US into a recession? And, if so, what might that recession look like? Economist and Nobel Laureate Paul Krugman, Goldman ... Show More
25m 40s
Apr 9
A Pause for Most Tariffs
President Trump announced a 90-day pause on retaliatory tariffs and a lower 10% reciprocal tariff for most countries. Meanwhile, the trade dispute with China is heating up. (00:21) Jason Moser and Ricky Mulvey discuss:- The market’s extreme reactions to tariff news.- China’s “nuc ... Show More
34m 13s