Is it possible to be smarter than the rest of the world?

Now, the way the current administration calculates the tariffs has become infamous.

Here's a quote from CNN: “The Trump administration used quite a simple calculation: the country’s trade deficit divided by its exports to the United States times 1/2." That’s it.

The calculation was first suggested by journalist James Surowiecki in a post on the X platform and backed up by Wall Street analysts. The Trump administration later confirmed that was the calculation (https://ustr.gov/issue-areas/reciprocal-tariff-calculations )  it actually used.

For example, America’s trade deficit with China in 2024 was $295.4 billion, and the United States imported $439.9 billion worth of Chinese goods. That means China’s trade surplus with the United States was 67% of the value of its exports — a value the Trump administration labeled as “tariff charged to USA.” 

So, let's look once more at the formula they used.

Although the formula "looks smart, with different symbols" - look up the decryption yourself and you will understand how ridiculous (and pathetic at the same time) it all is. It is completely incomprehensible to me how such decisions are made in the first place.

Of course, this is only my opinion and maybe I am wrong. Perhaps this is all part of some “bigger plan or strategy”.

Maybe this is part of the “art of negotiation”, and there is something else that I don’t understand…

However, once you look at the reports of the manufacturing and service sectors and read the “comments”, it seems that no one understands this either:

• “Complex markets saw a surge in volume buying in anticipation of 2025 being slightly better than 2024. In March, however, all markets saw a slowdown, with fear and inventory stocking to hold through a potential crisis.” [Chemical Products]

• “Acute shortages continue to impact supply chain continuity. Chinese restrictions on critical minerals such as germanium have caused major shortages, resulting in all supply needed in 2025 already assumed — and, not surprisingly, significant price increases as a result. Tariffs are causing minor ripples at the moment in securing supply, with purchase order terms narrowing due to uncertainties. A&D (aerospace and defense), which has been very resilient, is starting to see questionable medium- to long-term demand due to governmental policy, including retaliatory actions taken by foreign countries with foreign military sales.” [Transportation Equipment]

• “Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures.” [Computer & Electronic Products]

• “Starting to see slower-than-normal sales in Canada, and concerns of Canadians boycotting U.S. products could become a reality.” [Food, Beverage & Tobacco Products]

• “Business condition is deteriorating at a fast pace. Tariffs and economic uncertainty are making the current business environment challenging.” [Machinery]

• “New order levels have increased and are better than expected. We suspect that our customers are trying to build inventory at current prices to get ahead of expected tariff and related cost increases. We expect this surge in demand to be short-lived.” [Fabricated Metal Products]

• “Demand has been stable, consistent with last year. No evidence of a growing demand. Tariff impacts and mitigation strategies are a daily conversation.” [Electrical Equipment, Appliances, & Components]

• “Newly implemented tariffs are significantly impacting gross profits. Canada’s new tariffs on U.S. goods are significantly impacting orders from that country. Quotes and sales are lower from Europe due to the threat of retaliatory tariffs.” [Miscellaneous Manufacturing]

• “Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined. Overall concern is whether or not demand destruction will occur with higher pricing.” [Primary Metals]

• “The tariffs have caused issues in the groundwood paper market especially. With a large amount of groundwood imported from Canada to the U.S., the tariffs and resulting delays have caused havoc with the supply chain and deliveries. U.S. mills are getting backlogged and late from the additional tonnage they've taken on.” [Information]

• “New equipment purchases have slowed down over the last month due to the uncertainty of the new administration and cancellation of certain aspects of the Inflation Reduction Act.” [Other Services]

• “Government budget cuts and layoffs are negatively impacting our operations.” [Public Administration]

• “We are still holding back some money for emergency use in case the new administration targets grant usage and puts a hold on current spending.” [Transportation & Warehousing]

• “We’re expecting price increases in the near future due to tariffs on several commodity-based contracts, including waterworks items.” [Utilities]

• “Tariff confusion and the variety of ways that suppliers are responding have had a strong effect on our purchasing decisions this month, causing us to shift spend and in some cases buy in advance of reported tariffs.” [Wholesale Trade]

Consumer sentiment also expresses a clear opinion:

It seems that consumers expect prices to rise in the near future.

How does the stock market respond to all of this?

What do global stock markets think about this?

Let’s have a look at v=Volatility Index VIX.

A higher VIX value indicates greater anticipated volatility and market uncertainty, while a lower VIX value suggests market stability.

At the moment, the VIX is as high as it was during the COVID pandemic. Just think about it - the similar volatility was at times when the world nearly “stopped”. The times when there were restrictions on nearly any movement, including work, and thousands of people died from COVID every day.

That's how much pressure Trump and his current US administration have created within a short period.

I believe that the tariffs will affect the USA the worst. Because they impose tariffs on EVERYONE! Meanwhile, the rest of the world will work among themselves as it has been working until this very moment.

Besides, all these actions lead to more unification throughout the rest of the world – thanks to the decisions made by the current administration of the USA.

In Europe, there is no longer any talk of any member state wanting to leave the EU. Overall, Europe is more united than ever, minus a few “artists” who oppose nearly everything for their own particular reasons.

The US Federal Reserve is already forecasting negative GDP:

Just a little reminder: just a few months before, a 2% increase was predicted, and now we have "gained" a decrease of -2.8% (Latest estimate: -2.8 percent — April 03, 2025)

At the beginning of the year, the “Big Banks” predicted the following market forecasts (just small reminder here: at the beginning of 2025, the price of the S&P500 was 5900):

Over the last couple of days, UBS has trimmed its expected S&P 500 SPX target for the end of 2025 from 6,400 to 5,800, and RBC has cut it to an even more lowering 5,550.

The downgrades come as expected aggregate earnings per share for the year are trimmed, a function of a deteriorating economy.

JPMorgan now says that if Trump's tariffs are maintained, there's a 60% chance of a global recession this year.

Looking at all of the above, I am confused about the decisions that have been made... Maybe the current administration will turn out to be smarter than the rest of the world... Time will tell, but for now, it seems that we need to consider investment/trading opportunities outside the US.

Stay tuned!

Agris