Stocks have been volatile this week as the market wrestles with the impact of Trump’s tariff policies and how far he intends to take them.
Trump aims to energize and grow the U.S. economy—which is good for the market as a whole—but he also wants to reshape the economy.
A rising tide generally lifts all boats. However, there will be winners, and inevitably some losers, as Trump implements his industrial policy.
One of the top priorities of the new administration is to reinvigorate domestic industrial production. As Trump emphasized in his speech to the joint session of Congress on March 4, tariffs are the main tool in the toolbox.
Shares of one of our Inflation Protection Model Portfolio holdings have advanced approximately 8% since Trump’s speech—as this company is becoming increasingly seen as a beneficiary of Trump’s domestic production agenda.
This particular stock is also an indirect long-term AI play. As we explain in more detail below, now is a great moment to revisit the investment opportunity.
Tariffs are arguably the most controversial element of Trump’s economic agenda—and the part that markets have had the most trouble digesting.
Trump likes tariffs for a variety of reasons.
The U.S. consistently runs trade deficits with the rest of the world. Much of this has to do with the fact that the U.S. dollar functions as the world’s reserve currency.
There would, by definition, be no trade deficit if foreign countries returned all the U.S. dollars they received when Americans buy their goods and services and bought goods and services from Americans.
One of the main reasons foreign countries have a natural tendency to accumulate U.S. dollars is that they need them to conduct international trade.
That is what it means for the dollar to serve as the global reserve currency. It is the primary medium of exchange among nations.
The result of this hoarding is upward pressure on the U.S. dollar relative to foreign currencies, which makes American goods relatively less competitive in both domestic and international markets.
Stephen Miran, Trump’s nominee to Chair the Council of Economic Advisers, is especially focused on this dynamic. He has advocated for tariffs as a way of addressing this problem by putting U.S. goods on a more equal footing, while also generating revenue for the government.
Trade imbalances are exacerbated by high tariffs applied to U.S. goods by other countries. Other forms of commercial restrictions also make it difficult if not impossible for U.S. companies to access their markets.
Trump sees tariffs, or the threat of tariffs, as a way to pressure other countries to have more symmetrical trade policies.
