In the classic Broadway musical “Annie,” the famous comic strip orphan declares that the sun will come out tomorrow.
With President Donald Trump’s proposed Liberation Day set to kick off, investors and economists are hoping for some sunshine of their own.
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The plan calls for a set of tariffs on imports from other countries that Trump says will free the U.S. from a reliance on foreign goods.
The stock market has been stuck with plenty of cloudy and gray days since Trump unveiled his plans.
During the first quarter, both the S&P 500 and Nasdaq broke their five-quarter winning streaks and suffered their heaviest three-month losses since 2022.
Stocks have shed more than $5 trillion in value since the accelerated selloff began in mid-February.
President Donald Trump tariff plans has supporters and detractors
Markets writer: Trump plan ‘won’t work’
Goldman Sachs analysts recently warned that the U.S. economy faces a sharply higher risk of recession over the next 12 months, as tariffs reduce growth, stoke inflation and deepen the market’s first-quarter decline.
Markets were falling again on April 1, just 24 hours ahead of Liberation Day, after a Washington Post report suggested that the administration was planning a blanket 20% levy on most U.S. imports as part of its so-called reciprocal tariff strategy.
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The on-again, off-again levies — Trump has threatened some of them, then pulled them back — have angered America’s allies, whipsawed investors and generally caused widespread confusion.
Tariffs are a key element of the Mar-a-Largo Accord, a term that gained traction following the release of a November 2024 paper written by Stephen Miran, chairman of the Council of Economic Advisers.
The multilateral pact would theoretically weaken the dollar, trim the weight of U.S. treasury securities held by foreign central banks, and narrow America’s trade deficit.
The idea is to restore American production and employment by devaluing the dollar and imposing tariffs on foreign goods.
Two of TheStreet’s contributors have come down on opposite sides of the plan.
On one side, we have TheStreet’s senior correspondent, Martin Baccardax, a former bond salesman who spent eight years on the trading floor in Toronto and London. He says the Mar-a-Largo Accord “won’t happen and won’t work.
“First and foremost, with foreign investors owning around 25% of the overall U.S. debt — a tally of around $8.5 trillion, which tops even that held by the Federal Reserve — inducing the sale of those assets is an incredibly risky process,” he wrote in a recent column.
In addition, Baccardax said that asking any trading partner to dump their U.S. treasury securities and incur significant losses, while just recently having slapped tariffs on the goods they export into the U.S., “seems like a tough sell.”
Fund manager: Trump using tariffs to curb economic crisis
Trump’s planned tax cuts, he said, which are likely to cost $4.5 trillion, are being offset by only around half that total in spending cuts, even when factoring in a generous result from Elon Musk’s effort at overhauling the federal workforce through the so-called Department of Government Efficiency.
“Seeking to make your debt more expensive by weakening the dollar, while simultaneously discouraging foreign investors from buying it, doesn’t seem like a winning strategy,” Baccardax said. “More expensive debt, more expensive goods, and the end of U.S. dollar exceptionalism.
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“That not likely to make America great again,” he concluded.
Maleeha Bengali, CEO of MB Commodities Capital and a contributor to TheStreet Pro, has a quite different point of view.
Bengali, who worked as a portfolio manager and hedge fund manager for UBS, Goldman Sachs and Merrill Lynch, said Trump is using trade tariffs on allies to curb an economic crisis that he inherited.
“As President Trump took office, he was handed an economy with a huge debt pile, endless spending, sticky inflation with asset prices at highs and a Federal Reserve that had its arms tied behind its back,” she said.
Bengali said one of Trump’s main campaign goals was to lower inflation, bring jobs back to the country and provide tax cuts and less regulation to help the economy grow.
“These plans would require more fiscal deficit spending, but the bond vigilantes were not playing ball,” she said.
Bengali said that the GDP growth over the past few years under President Joe Biden had been aided by a massive increase in government spending, enabled by issuance of more and more debt.
“Headlines may seem erratic on any given morning, but if one looks through the noise, it is clear that Trump is cleaning shop and trying to lower the debt-to-GDP ratio, giving him some room to increase spending without killing the economy,” she said.
“It seems there may be some genius behind his madness after all,” Bengali concluded.
Where to from here on the economy?
Just as we find among our analysts at TheStreet, there is much disagreement regarding Trump’s plan in the outside world.
For example:
Sen. Tim Sheehy (R-Montana) said in an interview with CNN’s Kaitlan Collins that “there’s absolutely going to be short-term pain” from the tariffs, but added that “if you’re going to remodel your house to make it better in the end, it’s going to be really annoying in the short term.”
Meanwhile, Max Yoeli, senior research fellow at the London think tank Chatham House, said Trump’s plan undermined his campaign promises to lower prices and revive manufacturing. That’s because “tariffs are contributing to elevated prices, and long-term inflation expectations have spiked to a three-decade high.”
The truth is we won’t know whether Trump’s plans were effective for several years. In the meantime, we’d love to hear your thoughts.
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