Trump caused market turbulence on Wednesday by imposing high tariffs (Image: AP)
Several fund managers are questioning the rationale behind President Donald Trump's decisions as his inconsistent stance on trade policies wreaks havoc in financial markets.
Tom Lee, head of research at financial analysis firm FSInsights, expressed these concerns in a note penned on Wednesday morning, prior to Trump retracting most of his tariffs on U.S. trading partners. "In the last few days, we have had many conversations with macro fund managers," he wrote.
"And their concern is that the White House is not acting rationally, but rather on ideology. And some even fear that this may not even be ideology," he added. "A few have quietly wondered if the President might be insane."
The New Republic highlighted Lee's comments, in which he held Trump accountable for the economic fallout, stating that "multiple officials have stated they do not want nor expect a recession. There are enough economically savvy counsel who are aware of this. Furthermore, the two-to-three percent fiscal stimulus required to overcome a recession would offset any pledged reductions in government spending.
"This is a rational view," he concluded. Trump sent markets into a tailspin on Wednesday by imposing hefty tariffs on countries globally, only to backtrack later in the day, implementing a 90-day freeze on duties above a baseline of 10 percent on all nations except China, reports The Mirror US.
Dimon urged the president to allow the Treasury Secretary more time to negotiate with other nations (Image: AP)
Following China's announcement of an 84 percent duty on the US, Trump ramped up tariffs on the world's second-largest economy to 125 percent.
The markets experienced a dramatic upswing following the announcement of the delay, with the S&P 500 soaring by 7% in mere minutes. "If stocks begin to fail here, this would point to the rising probability we are facing a prolonged period of tightening financial conditions," Lee commented on Wednesday morning, prior to Trump's decision to implement a pause.
"Thus, the longer this volatility lasts, the greater the risk the US and the world are getting pushed into a needless recession."
Reports from the Washington Post suggest that Trump's change of heart on tariffs came after watching an interview with Jamie Dimon, CEO of JP Morgan Chase, on Fox Business. During the interview, Dimon warned that a recession was a "likely outcome" if the new trade policy persisted.
Trump increased duties on the world's second-largest economy to 125 percent (Image: AFP via Getty Images)
Invalid email
We use your sign-up to provide content in ways you've consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. Read our Privacy Policy
Dimon advised the president to give Treasury Secretary Scott Bessent additional time for negotiations with other countries, highlighting that tariffs could be strategically used to boost trade. "I'm taking a calm view, but it could get worse," Dimon remarked.
When asked about his decision to suspend the tariffs on Wednesday, Trump responded, "I would say this morning. Over the last few days, I've been thinking about it. Fairly early this morning," Kevin Hassett, Director of the National Economic Council, revealed on Thursday that around 15 nations have extended offers to the US, noting that the halt was "based on good faith conversations."
