The Tariff Train Wreck Is Foreseeable and Avoidable
Firms and households have had time to mitigate the damage from tariffs. That may help soften the blow.
Do something.
Photographer: Darren Staples/Bloomberg
The US stock market lately feels a lot like the murder-on-the-train-tracks trope from old Western films and cartoons: a distressed victim (the S&P 500 Index) is chained to the rails, and a locomotive is approaching from a distance (a tariff-induced recession). Everyone’s watching with a mix of fear and morbid fascination, but there may also be time to change the course of events. At least Mr. Market seems to think so.
Despite the drawdown from recent highs, the S&P 500 was still trading at about 20 times blended forward earnings as of the most recent close, above its 10-year average and significantly higher than the multiples investors expect in downturns. What’s more, that ratio is based on projections that still assume 2025 earnings growth of around 8%. Evidently, recession is a long way from being “priced in,” and that’s somewhat understandable. There’s still a chance for President Donald Trump to abandon his self-destructive tariff policies (including a 10% baseline tariff that may increase on many countries at the end of a 90-day reprieve in July, and a 145% levy on China, the world’s second-largest economy). Even failing that, foreseeable disasters tend to turn out less badly than the ones that come out of nowhere.