US moves beyond justifiable tariffs into something that is non-economic: Ex-Barclays CEO Bob Diamond

According to Bob Diamond, the US has moved beyond the economic justifications for tariffs and into something non-economic. The markets concur with this statement. They are in red, and Trump demonstrated yesterday that he is not interested in negotiations and is instead establishing a permanent economic structure. 

The former Barclays CEO called it “profound an act of economic self-harm as I’ve seen in my lifetime.” According to him, 11% (3.3 trillion) of the US economy is based on imports, and 40% of those goods aren’t finished goods; hence, this has a big impact on the supply chain.

On the other hand, Trump’s perfect plan is to cut costs through DOGE and to create more revenue through tariffs. The US spends more funds than it can afford. This is through so much spending and the unfair trade between it and other nations. 

Trump has made it clear that he is no longer concerned with the markets; rather, he is concerned about the future of the US. In fact, he is encouraging investors to buy stocks for cheap because things will get better with time.

Currently:

S&P500 futures are down 1.8%
Dow futures are down 1.7%
Nasdaq 100 futures are down 2.3% pic.twitter.com/FCu12i4h0V

— unusual_whales (@unusual_whales) April 7, 2025

Meanwhile, futures for the S&P 500 fell 1.8% in premarket trade Monday, while futures for the Dow Jones Industrial Average fell 1.7%. Nasdaq futures dropped 2.3%.

Look out for stagflation – Bob Diamond

Bob Diamond pointed out that in his first term, Trump imposed 2 to 3% tariffs. However, this time, he has gone to the extreme of 20% and above. This could mean prices go up, and production go down, which can lead to stagflation. 

This is a similar stance made by the Billionaire investor Stanley Druckenmiller.  He said that any tariff beyond 10% could tip the delicate balance in global trade.

Trump’s plan, which he announced earlier this week, sets a base rate of 10% but lets goods face higher tariffs. Stock markets lost money in a way that hasn’t been seen since the peak of the pandemic. This has scared investors, who are worried that the economy will get worse. 

That’s not all Diamond says that the US can recover from this economic turmoil, but the US allies might not recover. However, that is not one of Trump’s concerns. Apparently, more than 50 countries have approached the White House to talk about lowering tariffs in the aftermath of Trump’s announcement last week.

However, Trump said, “I do want to solve the deficit problem we have in China, with the European Union and other nations, and they’re going to have to do that. And if they want to talk about that, I’m open to talking.” 

As a result, Asian markets are following Wall Street stocks through their worst two-day stretch in five years. Japan’s main stock market, Nikkei, dropped more than 8% right after it opened. Reuters says that the share average, which tracks 225 of the most important companies in the country, has dropped below 33,000 for the first time since August 2024.

The Kospi in South Korea fell more than 4.8% soon after it opened. A circuit breaker meant to stop panic selling was set off, which stopped trading for five minutes.

After it opened, Taiwan’s Taiex fell more than 9.7%. New Zealand’s NZX 50 fell more than 3.5%, while Australia’s ASX 200 fell as much as 6.3% in morning trade.

Also, the company that makes Jaguar and Land Rover cars has stopped sending cars to the U.S. because President Trump put a 25% tax on vehicle imports, which is hurting Britain’s auto business.

The company said, “The USA is an important market for JLR’s luxury brands,[…] As we work to address the new trading terms with our business partners, we are taking some short-term actions, including a shipment pause in April, as we develop our mid- to longer-term plans.”

To Trump, this is good news because the Americans will buy from their manufacturers.

“It’s tough for the Fed chairman” – Bob Diamond

Bob Diamond said that the tariff’s impact is a big deal. He expressed the frustrations that Powell may be having because when he cuts rates, the inflation goes up.

Trump has been on Powell’s case and needs to cut rates. He accused him of being involved in politics. On the other hand, Investors think the Federal Reserve may now move faster to cut interest rates.

According to experts, the change is due to a change in how they see growth in the US. In the short run, new tariffs could worsen inflation, but the Federal Reserve may support the economy by lowering interest rates instead of keeping rates low to deal with rising prices.

Thursday, Fed Chair Jerome Powell said, “It feels like we don’t need to be in a hurry. We’re going to have to wait and see how this plays out before we start to make adjustments.”

However,  the future is still uncertain. Dominic Pappalardo, chief multi-asset analyst, says that despite high inflation, a tariff-induced economic downturn may be enough to get the Fed to cut rates. That would be different from what the Fed usually does to deal with inflation, which is to tighten policy to keep prices from rising too quickly. 

In addition, Jamie Dimon, CEO of JPMorgan Chase (JPM), said that the new tariffs by the Trump administration will cause short-term inflation and slow growth, but it remains in question whether they will lead to a slowdown.

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