President Donald Trump’s tariffs are creating stock market volatility. The S&P 500 has dropped about 9% from its record high as inflation and growth concerns rise. President Trump says he’s not concerned with the market’s fluctuations as he implements his protectionist agenda.
However, that stance might soon change. The S&P 500 is down nearly 9% from its February 19 peak, leading Trump to acknowledge that markets may experience volatility as he places tariffs on Canada, Mexico, China, and the European Union. The critical question remains: Is there a point at which the downside pressure becomes too politically unbearable for the president?
His treasury secretary, Scott Bessent, a former hedge fund investor, stated on Thursday that the White House is “focused on the real economy” and unconcerned about the market’s volatility. Despite this, some experts have their doubts. Economic strife caused by post-COVID inflationary pressures arguably cost Democrats their reelection bid last year.
A significant stock market decline could weigh on the spending decisions of top earners, consequently dampening growth, which is heavily dependent on consumer activity.
Market pressures challenge Trump’s tariff stance
Marko Papic, the chief strategist at BCA Research, believes Trump’s breaking point could arrive soon.
He suggested a 15% to 20% decline in the S&P 500 might compel the president to reconsider his trade war. “For sure he’s going to care about the stock market because he’s going to lose political capital if the economy goes into recession or if households feel poor,” Papic said. “There’s absolutely no way he’s impervious to that.”
Desmond Lachman, a senior fellow at the American Enterprise Institute and former International Monetary Fund official, emphasized that it’s more about the speed and disorderliness of the sell-off rather than the total cumulative decline.
“What’s occurred over the last couple of weeks, if that continues at this kind of pace, he’ll have to cave,” Lachman noted. With a Republican-controlled Congress and a 6-3 conservative majority in the Supreme Court, financial markets may be the last significant check on Trump’s power, Lachman added. “They don’t care what he thinks; they’ll just dump the stocks,” Lachman said of investors.
“That’s really the only check we’ve now got on ridiculous policies.”
If financial and economic volatility continue, Papic argued that other constraints on Trump’s policy-making ability will likely emerge. While Republican members of Congress risk political reprisal for opposing Trump’s agenda, a weakened economy and struggling stock market could incentivize senators or representatives to dissent and “make a name for themselves.” In such a scenario, Trump’s grip on power could look drastically different in a few months. “If they mess around and find out, he could be a lame duck in three months,” Papic said.
“We’ll be writing those takes much faster than anyone thought because he’s got a very narrow majority in the House.”
Photo by; Lucas van Oort on Unsplash
