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Trump’s Tariff Threats Spark Anxiety on Wall Street: What Investors Need to Know

Emilia Wright | January 27, 2025

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Trump Tariff Talk Heats Up on Wall Street, Forecasting a Rocky Road Ahead for Investors

Increasing Focus on Tariff Policies Affecting U.S. Stock Market

The discussion surrounding tariffs is gaining momentum as Wall Street grapples with the implications of potential policy changes under President Donald Trump. Analysts at Citigroup have identified tariffs as a significant point of concern for investors, forecasting a turbulent period ahead as companies navigate these policy uncertainties. According to Scott Chronert, a Citi Research analyst, the importance of tariffs in the ongoing equity market landscape has become increasingly clear.

In a recent research note dated January 23, Chronert noted a “surge” in companies discussing tariffs during their quarterly earnings calls. This uptick has been documented through a three-month moving average that highlights the growing relevance of tariffs in corporate communications.

Market Performance and Investor Sentiment

On Friday, U.S. stocks experienced a downturn, with the S&P 500 Index retreating from its record closing high of 6,118.71, achieved just a day earlier. Despite this decline, the S&P 500 managed to secure back-to-back weekly gains after President Trump resumed his duties in the White House on Monday.

Chronert acknowledged that while President Trump did not highlight concerns regarding widespread tariff actions during his inauguration remarks, the topic of tariffs is likely to remain a source of volatility for the upcoming months. “For now, policy timelines for tariffs and potential tax reform appear to have been pushed out,” he explained.

Trump’s Tariff Threats and Their Implications

Despite these uncertainties, President Trump reiterated his position on tariffs during the World Economic Forum held in Davos. He emphasized the use of tariffs as a mechanism to bring manufacturing jobs back to the United States. According to Solita Marcelli, Chief Investment Officer for the Americas at UBS Global Wealth Management, investors are closely watching this area because it’s one where the president possesses substantial unilateral authority to impact the market.

Marcelli elaborated that tariffs are becoming a primary concern for many investors due to their potential effects on growth and inflation. “It is the area where the president has the most unilateral authority to alter the market consensus around continued growth and receding inflation,” she stated. The worry is that aggressive tariff implementations could lead to inflationary pressures that might stifle economic growth.

Federal Reserve’s Upcoming Meeting

Adding another layer of complexity, the Federal Reserve is scheduled to hold a two-day meeting on monetary policy next week. This comes after the central bank initiated an interest rate-cutting cycle in September, following a significant decline in U.S. inflation from its 2022 peak. Investors will be keenly observing how the Fed reacts to the evolving landscape influenced by potential tariff policies.

Conclusion: Navigating Uncertainty Ahead

As Wall Street braces for what could be a tumultuous few months, it is imperative for investors to stay informed and adapt to the ever-changing economic landscape influenced by tariffs and trade policies. With companies in the S&P 500 increasingly acknowledging the importance of these discussions in their earnings calls, it is clear that tariffs will play a crucial role in shaping market sentiment.

The interplay between Trump’s tariff policies and investor confidence suggests that periods of both volatility and opportunity are ahead. As the Fed contemplates its next policy moves in response to economic indicators, including potential inflationary pressures from tariffs, investors will need to remain vigilant and agile to navigate what may be the rocky road ahead.

For further insights on how tariff policies may affect market volatility and economic growth, stay tuned to our ongoing coverage of financial news and analysis.