Global markets slipped this morning on the news that President Trump wants a 35% tariff on Canada. And if he puts a 200% tariff on pharmaceuticals it might wipe 4% off the GDP of Switzerland, Pantheon Macroeconomics estimates. Yet many investors are assuming that much of this will never happen.
S&P 500 futures slipped 0.7% this morning, premarket, after the index hit a new all-time high yesterday of 6,280. Around the world, markets in Asia sold off today but mostly at levels of less than 1%. In Europe, the Stoxx Europe 600 was down 1% in early trading. Many of those indexes have also hit recent all-time highs, so -- fingers crossed! -- this could be routine profit-taking rather than the first rumblings of an earthquake.
Emma Wu at JPMorgan noted that retail investors recently became more cautious. "Activity slowed further this week as profit-taking continued," she told clients in a note seen by Fortune. "Over the past week, they net bought $5.7B - broadly in line with the 12M average but $1B below the YTD weekly pace."
Nonetheless, it's a stark contrast to the panic of early April when President Trump made his first announcements about new trade tariffs and markets went into a nose-dive. This time around, investors are assuming that whatever Trump announces today will either not happen, get delayed, or be moderated in a future deal.
In Trumpworld, tomorrow never comes.
This level of calm requires investors to ignore a lot of new elephants in various asset-market rooms. Last night, Trump announced he wanted a 35% tariff on Canada. But analysts today are noting that the tariff would only apply to goods not covered by the existing trade deal between the U.S. and Canada.
"So the bark is probably stronger than the bite here and this probably reflects why S&P futures are only down a couple of tenths so far this morning," Jim Reid and his team at Deutsche Bank told clients this morning.
And then there's the 200% tariff on pharmaceuticals. If that was to ever actually happen it would wipe 4% off the GDP of Switzerland, according to Claus Vistesen and Melanie Debono at Pantheon Macroeconomics. (The Swiss make and export a lot of drugs.) But there's no need to freak out, the pair say. "The timeline is distant, and the threat was an off-hand comment in an interview -- which we think is why most pharma stocks fell by less than 1% on the news."
At UBS, Paul Donovan had a similar theme: "Most of Trump's tax burden hits US consumers with a delay of several months," he wrote this morning. "Investors are inclined to assume that Trump will retreat as Trump has done so often."