March 10, 2025

By Andrew Gier, CFA, Head of Capstone’s Global Trade Practice

Since President Trump took office, Capstone has received a flood of questions about the direction of US trade policy. One of the most common has been, “How do you predict what this guy is going to do?” It’s a fair question. How do you predict what someone famed for their unpredictability is going to do?

In trade policy, now more than ever, there are a lot of shades of gray. President Trump might promise sweeping tariffs, impose them, and then subsequently tailor them down significantly. If you care about trade because of exposure to a very specific product or a specific country, as most Capstone clients do, this only adds to the sense of unpredictability. How do you know if these changes will matter for you in two weeks?

While I believe we will all have to embrace a certain level of volatility for the remainder of President Trump’s term, I wanted to take the opportunity to highlight areas where I do think there is some consistency. These represent the framework for how I think about trade policy under President Trump, and I hope they might help others as they think about the risks they might face from changes in trade policy.

1. The Goods Trade Deficit is King

One of the most common questions we get is, “What does President Trump want from all of this”? In this area, President Trump has been very consistent in his messaging. He wants the US trade deficit in goods to go down. It is as simple as that. He doesn’t care if a factory is making socks or semiconductors; it is a good thing if it is made in the USA. If the US has a significant trade deficit with a country, that’s a sign this administration will see issues that need to be addressed, expect it to face tariffs.

2. What Trump Wants, Trump Gets (and what he wants is tariffs)

Trump’s power to impose and adjust tariffs is nearly limitless. This power is matched by his desire to use tariffs to reshape the US economy. Trump’s interest in tariffs is not new, you can find interviews where he talks about the need to use tariffs against Japan in the 80s. The combination of these factors is why, for any particular issue, I start with the assumption that President Trump will impose tariffs and work from there.

3. Process Matters

President Trump has tested the limits of his executive authority in imposing tariffs on Canada and Mexico using the International Emergency Economic Powers Act (IEEPA) to impose tariffs nearly immediately without a public comment process or formal report. That won’t be the case for all the tariffs he imposes. For many of President Trump’s industry-specific threats, I expect they will make use of more tested statutory authorities like Section 232 or 301. Both of these take roughly a year before tariffs are implemented. While I don’t expect the use of a slower process to make it less likely that President Trump will elect to impose tariffs in these cases, it does matter when you think about the timeline over which tariff risks can materialize. We won’t always be moving at the breakneck speed of the last few weeks.

4. Congress Doesn’t Matter

In the coming weeks, I expect we will continue to see stories about members of Congress expressing concern about tariffs and introducing bills to limit President Trump’s authority. I’m ignoring those for now. There is almost no chance Congress could summon the veto-proof majority (and trust me, it would have to be veto-proof) necessary to rein in President Trump on trade, especially this early in his term.

5. The Courts Probably Don’t Matter

Legal challenges to President Trump’s actions are inevitable. However, history will not be on their side. Traditionally, courts have been incredibly deferential to the President when it comes to determinations of national security. That trend is likely to continue.

6. For Every Action, an Equal and Opposite Reaction

Another constant is that there will be retaliation every time a new tariff is imposed, and this time, it will come faster. I expect retaliation from US trading partners will largely attempt to mirror actions taken by President Trump, meaning tariffs on US exports often times targeting similar products. However, as we saw this week, it might not always be just tariffs. Export restrictions, changes in government contracting, and other non-tariff barriers will all be a part of the playbook for US trading partners.

7. Trump will Declare Victory

 Rest assured, no matter what happens, it will have been a win in Trump’s mind.

Capstone will continue to pay close attention to the fast-moving developments on the trade & tariff front. The cold, hard rules of President Trump’s trade war will have implications for a wide range of governments, companies, and investors alike. It would be wise to heed them.

---