“Things are rarely as bad — or as good — as most people think.”
The United States has moved from global trade leader to protectionist enforcer, unleashing a series of tariffs that have rattled supply chains, international alliances, and investor psychology. But while the headlines scream breakdown, I believe we're entering a transitional moment — one filled with uncertainty, yes, but also opportunity for those who can keep perspective.
The sudden re-escalation of trade tensions has brought a wave of shock:
China responded with 34% tariffs and export restrictions on critical materials like rare earths.
These developments are not incremental. They are transformative. The era of open markets — the framework that lifted millions out of poverty and drove record corporate profits over the past 40 years — is being actively dismantled.
Ray Dalio has compared this period to the 1930s, when the global order broke down and economic nationalism surged. He sees three layers of disruption:
We’re reaching the limits of debt-driven growth.
B. Internal Political Chaos
Economic stress is becoming political stress, with voters demanding radical change — even if it’s disruptive.
-WWII multilateral system (WTO, IMF, UN) is losing credibility.
“You win a war, you set the rules. That’s how it worked in 1945. But that system is now crumbling.”
3. The Bessett Doctrine: Power Politics in Trade
“We export one-fifth to them of what they export to us. That’s a losing hand for them.”
This is classic negotiation-through-chaos, a strategy President Trump has used throughout his public career — escalate first, force reaction, then negotiate from strength.
The imbalance gives the U.S. leverage
The result will be better trade terms, even if the process is messy
4. Krugman’s Reality Check: The Math Doesn’t Lie
Today’s tariffs dwarf Smoot-Hawley, especially since the U.S. economy is 3x more trade-exposed than in 1930.
Krugman expects GDP hits worse than Brexit if tariffs persist.
“It’s like saying you run a deficit with your grocery store — they don’t buy anything from you. That doesn’t mean you’re getting ripped off.”
Businesses can’t plan when tariff rates shift by 20% in a week.
5. China’s Calculated Resistance
Their response isn’t about just soybeans or iPhones — it’s about signaling:
We will endure pain if it preserves sovereignty.
China may believe it can absorb short-term damage more effectively:
Its population is historically more tolerant of hardship in the name of national interest.
6. Media Lens: The Real-World Cost of Tariffs
In Oxford, U.K. MINI factories are reeling from Trump’s 25% auto tariffs.
In Singapore, officials express disbelief at being punished despite running a U.S.-favorable trade balance.
“Look at your living room — your TV, your fridge, your phone. This is why this matters.”
7. My Framework: Order Within the Chaos
President Trump wants a “win” to present to his base — whether or not it’s economically sound.
He may spin a partial agreement as a total win, and markets will respond positively to relief, not just substance.
8. What Investors Should Actually Do
A. Don’t Chase Headlines
Price action matters more than policy noise.
Watch for sideways ranges forming with rising volume at support.
C. Scale In Carefully
Take partial profits on strong moves — especially if driven by sentiment, not fundamentals.
In volatile environments, consider options strategies to define risk.
You’re not trying to catch the exact bottom. You’re trying to catch the confirmation.
9. Conclusion: It’s Bad — But Maybe Not That Bad
The worst-case scenario is being priced in. And in markets, perception is often worse than reality.
But stocks — as forward-discounting machines — are not waiting for perfect peace. They are looking for the peak of panic, and when that moment passes, they move.
Things are rarely as bad — or as good — as most people think.
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This article was written by Itai Levitan at www.forexlive.com. Read More Details
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