🌐✨ Trade and AI uncertainty are not the same

Another great example of the Down Wing versus Up Wing dichotomy

My fellow pro-growth Up Wingers,

For the past few days, the greatest amount of economic uncertainty hasn’t been coming from the emerging AI Revolution. You can credit President Trump for that. His latest tariff offensive has wrong-footed markets and economists alike. JPMorgan's economics team, echoing broader Wall Street sentiment, admits being blindsided by protectionist trade measures far more sweeping than expected:

While awaiting clarity on actual policies, it is important to emphasize that this weekend’s announcements point towards a materially different US policy mix than is built into our 2025-26 outlook. The tariffs announced this weekend are not only larger, but different in nature than the actions incorporated in our baseline forecast. In concentrating large tariff increases on Canada and Mexico the negative supply shock that results is likely to have far bigger spillovers to the US. The actions taken this weekend also threaten to dismantle a multi-decade free-trade agreement. Beyond the rising cost of moving goods across borders it will disrupt established supply-chains and depress North American business sentiment, heightening the risk of non-linearities not captured in economic models. Equally important, this weekend’s actions challenge our underlying view that the Trump administration will strive to limit disruptive policies as it balances its desire to reduce engagement with the world with a commitment to support US businesses. In short, the risk is that the policy mix is tilting (perhaps unintentionally) into a business-unfriendly stance.

I get the concern. Trump’s hard-and-fast announcement of tariffs on Canada, Mexico, and China didn’t project a particularly New Golden Age-ish vibe: slower growth coupled with inflationary pressures. Of course, the ultimate economic cost remains murky, hinging on whether these trade tensions escalate or ease beyond the month-long pause on the Canada and Mexico tariffs. Uncertainty reigns supreme — a state of affairs that markets notoriously detest.