On the day of the US presidential inauguration I was told by a top US tech chief executive that although he was likely to be hit by retaliatory tariffs, he assumed any trade war would die down.
“Trump lives by the Dow Jones’ reaction,” he said – something markets call the “Trump put”.
This means that whenever a White House announcement that damaged sentiment came out, the president would row back after seeing a stock market fall.
Those assumptions have now changed, after the president gave a TV interview in which he downplayed how much he was moved by markets.
And only a day after US stock markets fell sharply on worries over the impact of Trump’s policies, the president has decided to double tariffs against Canada on steel and aluminium, in response to higher charges for Canadian electricity, worth about $100 per bill, in New York, Minnesota and Michigan.
On Monday, Ontario premier Doug Ford announced a 25% surcharge on US-bound electricity and threatened to “shut off” supply completely.
President Trump has said he is rebuilding wealth based on decades or even a century into the future, and this cannot be measured in the quarterly results of America’s stock market giants.
Alongside comments from his Treasury Secretary Scott Bessent, the White House was communicating to markets that the president now has some tolerance for short-term market and economic pain. This has changed the calculus.
There are another two factors at play here. There is evidence of actual potential reversal in the US economic sentiment, raising questions about a recession.
The very latest real-time analysis by the Atlanta branch of the US Federal Reserve predicts a falling US economy in the first three months of the year.
Government cuts could also contribute to such a reading, but private sector sentiment has taken a hit too, especially by the hokey cokey over tariffs.
Above all, the uncertainty threatens to be crippling. The policies change by the day, and even then can get retrospectively paused.
Key US government departments are not entirely clear on the direction of travel in the White House.
On top of all of this, in the case of Canada, a likely election suggests little incentive to compromise.
Indeed, what is there to compromise with when Trump says he wants to use economic leverage to make his northern neighbour his “51st State”?
The direction of travel here is for the trade war to escalate in intensity and scope.
New trade barriers on the European Union may emerge in three weeks’ time based on “reciprocity”.
As other nations see signs of inflation re-emerging in the US, they will be more likely to try to add to it, to bring home to US consumers the consequences of the decisions of their government.
In the past fortnight the world has learnt that President Trump is serious about tariffs, even on his allies. They have been applied in a huge way.
Key trade partners have reciprocated in kind and have an incentive to up the ante. And the White House now wants to communicate it has a high pain threshold for short-term economic and market disruption.
All roads lead to 2 April and the announcement on “reciprocal tariffs”, and for now these tensions do not appear to be heading for a truce, ceasefire or pause.
