03.06.2026 -Tariffs - here we go again
The tariff story is back.
The US administration is proposing new import levies of at least 10% on goods from major trading partners, including the European Union, United Kingdom, Canada and Mexico, following an investigation into products allegedly linked to forced labor.
Imports from countries such as China, Switzerland and Japan would face even higher tariffs of 12.5%.
The move represents another major step by President Donald Trump to rebuild the tariff wall that was previously struck down by the US Supreme Court.
Markets: Nobody Cares - almost no market reaction. Only a handful of companies with direct exposure to the affected trade flows experienced modest declines in their share prices today. Beyond that, investors largely ignored the announcement.
My View: What is the current tariff status? Guess your honest answer is that it has become increasingly difficult to keep track — you don’t even know!
Over the past year alone, tariffs have been announced, postponed, challenged in court, overturned, refunded, reintroduced under different legal frameworks, and now proposed once again under a new justification.
But at the moment, it hardly matters. Markets simply do not care!
Investors are chasing AI-related assets with little regard for rising geopolitical risks, trade tensions, inflation pressures, or deteriorating global supply chains.
The tariff topic highlights a much bigger issue. The United States desperately needs additional sources of revenue as government debt continues to grow rapidly.
Tariffs are one way to generate additional income. However, even under optimistic assumptions, tariff revenues are nowhere near sufficient to cover the government's financing needs, let alone its growing interest expenses.
This is one reason why the Trump administration is putting significant emphasis on lower Treasury yields.
Every basis point increase in refinancing costs makes servicing the enormous stock of US government debt substantially more expensive. As existing debt matures and needs to be refinanced, higher yields quickly translate into significantly higher interest payments.
If bond yields were to remain elevated for a prolonged period, debt servicing costs could eventually enter a self-reinforcing debt spiral.
To be clear, this is not my base case scenario, nor do I currently expect a US default. However, it illustrates how critical the fiscal situation has become.
For now, markets remain focused on AI. But beneath the surface, tariff uncertainty, rising debt levels, fiscal challenges and energy risks continue to build.
History has shown that markets can ignore risks for surprisingly long periods of time. They cannot ignore them forever.
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