The global economic growth rate has been further downgraded. Under Trump's tarif
The global economic growth rate has been further downgraded. Under Trump's tariff war, public anxiety in the US is intensifying, but the market is starting to "desensitize".In this tariff war initiated by US President Trump, public anxiety in the US is still escalating, but the stock market sentiment is stabilizing.
The Economic Policy Uncertainty Index (EPU), a measure of public anxiety compiled by economists from Northwestern University and Stanford University, rose by 28% in May. In contrast, the Chicago Board Options Exchange's VIX index, which reflects market "fear", dropped by 19.92% over the past month. The S&P 500, Nasdaq and Dow Jones Industrial Average rose by 5%, 7.84% and 2.64% respectively.
Marko Papic, chief geopolitical macro strategist at BCA Research, told First Finance that the market has gradually adapted to Trump's negotiating style, known as the "TACO deal" (referring to Trump's frequent last-minute retreats), and developed a kind of "desensitization effect".
"Nowadays, whenever there are radical remarks or actions, the market's reaction is weakening," Papic explained. "Just as the saying goes - 'The first time you get fooled is your fault, the second time it's mine.' The market is learning to filter out this noise."
The market is gradually becoming desensitized.
Dan Ives, global head of technology research at Wedbush Securities, said the market has realized that the tariffs proposed by Trump are "paper tigers" and are far less serious than initially feared. "The market's attitude is: These tariffs are only a small part of the original threat on April 2. You can't scare the market, you can't scare the bond market, you can't scare the dollar. That's why, although the Trump administration has been very tough in its words, it has actually significantly reduced its actions," he explained.
Ives gave an example, saying that Trump's proposal of "producing iPhones in the US" was nothing but a "fairy tale". He said straightforwardly, "Trump can threaten all day long, but Apple is well aware of the reality. The US can also keep threatening China, but the reality is that the US economy still needs China's participation. This is like the story of 'The Wolf Came'. Now people's reactions to sudden news are much calmer because we have become accustomed to such ups and downs over the past two months."
He further stated that Trump had promised to reach 90 trade deals within 90 days, but the actual progress was far behind. He believes that the Trump administration has created a self-inflicted "five-level tariff storm" and now has to find ways to cool it down every day by itself, including attempting to "withdraw" existing policies.
"The biggest problem right now is that no one knows the rules of this game, and they are changing every day. It has become a 'twilight zone', but investors are starting to adapt to this environment," Ives said. "Although many of the current tariffs will be reduced or renegotiated to some extent, the economic impact of tariffs is real, and ultimately it is the American consumers who will foot the bill."
UBS said in its investment note on June 2nd: "The progress made in the past two months indicates that the Trump administration is highly sensitive to short-term market risks and still has the motivation to reach agreements with trading partners."
Papic believes that the more important macro narrative in 2025 will be the slowdown of fiscal stimulus in the United States. "The dollar's movement has already begun to reflect this change. The market has overly focused on tariffs but has overlooked the fact that capital is flowing out of the United States. This is because the engine of US growth is slowing down, and this engine is not American exceptionalism or the AI boom, but rather the pace of fiscal profligacy in the United States."
He compared it to this: "The US deficit is still growing, but the growth rate has slowed from 120 miles per hour to 65 miles per hour. This deceleration will impact the attractiveness of US assets. Meanwhile, the capricious tariff policy is weakening the US position as a 'capital safe haven'. This is the real crux, not the specific tariff figures."
Americans and the global economy are being hit by the tariff war.
The latest poll shows that Trump's trade policies are causing widespread dissatisfaction among the American people.
According to a survey released by the polling organization YouGov in late May, only 41% of Americans approve of Trump's performance in office, while 54% disapprove. This approval rating has dropped to one of the lowest levels since his first term.
Public dissatisfaction is more pronounced on economic issues. Trump's overall economic approval rating stands at only 37%, and his approval rating for trade and tariff policies is only 35%. 57% of Americans believe that Trump has "gone too far" in raising import tariffs. Overall, 72% of Americans consider the economic performance to be "average" or "poor".
From a global economic perspective, on June 3rd, the Organization for Economic Cooperation and Development (OECD) lowered its growth forecast for the second time this year. It now expects the global economy to grow at a rate of 2.9% in 2025 and 2026, down from 3.3% in 2024.
Among them, the growth rate of the US economy is expected to slow down significantly, from 2.8% in 2024 to 1.6% in 2025, and further to 1.5% in 2026. US inflation is projected to rise to nearly 4% by the end of 2025 and remain above the Federal Reserve's target in 2026, suggesting that the Fed may not cut interest rates until next year.
The OECD added that the US's immigration restrictions and the significant reduction in federal government staff have further exacerbated the economic drag related to trade. As the negative impact of the US economic slowdown will outweigh the reduction in spending and the increase in tariff revenue, the US budget deficit will further expand.
OECD chief economist Alvaro Pereira said: "The global economy will almost without exception feel the weakness of the economic outlook... Slower growth and reduced trade will hit incomes and slow job creation."
Pereira said that countries urgently need to reach an agreement to lower trade barriers, "otherwise, the impact on growth will be quite severe, which will have a profound effect on everyone." However, the OECD stated that even if Trump changes his stance on tariffs, it will not immediately boost global economic growth and lower inflation, as policy uncertainty continues to drag down economic growth.
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