Tariffs Are About to Make a Comeback – Even as Markets Cheer Temporary Peace
Weekly Market Overview
Hi Traders,
Markets may be rallying now, but that optimism could be short-lived. A ceasefire between Israel and Iran has brought a sigh of relief to global investors. The Nasdaq 100 closed at a record high, reflecting renewed confidence after a tense week of geopolitical turmoil. Even former President Trump’s public concerns over the truce haven’t shaken the bullish tone – for now.
But while investors applaud the momentary calm in the Middle East, they may be overlooking a different kind of storm quietly brewing: the return of tariffs. Trade tensions haven’t dominated headlines lately, but they’re inching their way back into the economic and political foreground. This could be the next big shock for markets, one they’re not pricing in yet.
Temporary Relief, Long-Term Risk
The ceasefire has been a psychological win for markets. After days of climbing oil prices and mounting fears of regional escalation, the resolution – however fragile – has triggered a wave of risk-on sentiment. Tech stocks surged, led by expectations of improved stability and uninterrupted growth.
But the bigger picture tells a different story. The global economic system remains fragile, and geopolitical instability isn’t just a Middle Eastern problem. Trade relations, especially between the U.S., China, and the EU, are poised to take a protectionist turn that could eclipse even the short-term effects of military conflict.
Tariffs Are Back on the Table
With the U.S. presidential election cycle heating up, tariff talk is no longer dormant. Leading candidates are proposing aggressive trade measures – including a universal 10% tariff on imports – as a tool to reassert American industrial dominance. These proposals are not just campaign noise. They reflect a bipartisan shift toward economic nationalism and a broader willingness to disrupt global trade flows.
This shift comes at a moment when investors, buoyed by ceasefires and tech rallies, seem least prepared for new shocks. But trade policy, not battlefield news, could be what resets valuations next.
The Global Response Won’t Be Quiet
History suggests that tariffs rarely go unanswered. Should the U.S. escalate trade restrictions, major economic players will retaliate. China could tighten its grip on rare earth exports or impose counter-duties. The EU might accelerate its carbon border tax agenda. Supply chains could quickly re-fragment in response.
These developments won't be gradual. Market participants who were blindsided by the COVID-era supply chain crisis could be caught off guard again if new tariffs disrupt everything from semiconductors to agricultural goods.
Complacency in the Face of Complexity
Despite these risks, many companies and analysts remain focused on short-term gains. The Nasdaq's record-setting performance is a reflection of recent relief – not a verdict on future stability. As global trade drifts toward fragmentation, profit margins and sourcing strategies will be tested again.
Investors celebrating today’s ceasefire should remember that geopolitical risk is layered. The absence of missiles does not mean the absence of threats. Tariffs may soon challenge market exuberance in ways that a week of headlines out of the Middle East did not.
Prepare for Policy Volatility
Markets may rejoice over peace deals, but investors should look ahead to policy decisions that could reshape the economic landscape. Tariffs are not just a campaign tactic anymore. They are on the verge of becoming central to national economic strategies.
While the current rally is driven by relief, it could be upended by trade uncertainty. The prudent move now is to prepare for a new kind of disruption – one born not of war, but of political calculation and economic realignment.
- The Team at Altos Trading
In the next article: Federal Reserve Chairman Jerome Powell's admission that current economic data supports rate cuts while simultaneously refusing to act reveals a central bank paralyzed by hypothetical future risks at the expense of present economic realities.
