Authored by Jacob Shapiro, Head of Geopolitical & Macro Research and Senior Client Relationship Manager at Bespoke Group

I know how worried the average person is about market volatility and geopolitical issues when random people in my life ask me some version of, “So what do you think is going to happen?” This morning, I was at my daughter’s school, where I thrilled her class with a riveting reading of The Serious Goose. Afterwards, I helped her build a castle made of blocks whilst wearing a tiara — as one does. While we were building, a teacher started asking me about my opinions on President Trump’s tariff policy and the impact it was having on retirement accounts.

The average person’s worried index is extremely high.

Is the Trump Administration Bluffing?

Open a news website, turn on television news, or — if you are truly brave — hop on social media, and you are greeted with doom and gloom: comparisons of recent market performance to the pandemic, the 2008 Great Financial Crisis, and even the Great Depression. These comparisons are not unreasonable, especially those to the Great Depression, which was likely made worse and longer by the 1930 Smoot-Hawley Tariff Act. If the Trump administration doubles down on its global trade war, the current market drawdown may appear in retrospect to be the early innings of a much longer game.

Which is why I continue to think the Trump administration is bluffing. The comparison is a legitimate one. The Trump administration does not want people like you to think that — it wants the world to take its tariff threats with deadly seriousness. When Kevin Hassett, the Director of the National Economic Council, posted on social media that President Trump was considering a 90-day tariff pause, the White House wasted no time shouting down the assertion as “fake news.” (Hassett has since deleted the post.) But if President Trump doubles down, what awaits him is an economic depression, a bloodbath in the midterms, and an ignominious place in U.S. history books.

At a certain point, it does not matter whether President Trump is bluffing or not. The haphazard, lazy, and mercurial (I use these descriptors objectively, not pejoratively) way the Trump administration’s tariff policy has been rolled out has already cast the dice: Any country that can lessen its dependence on the United States will do so — whether Trump walks back the tariffs or not.

Not all countries can do so. Mexico is celebrating that it wasn’t included on “Liberation Day” because the country remains, as Porfirio Díaz once said, “So far from God, so close to the United States.” Canada still has some reckoning to do. Japan has already reached out to the U.S. and agreed to cabinet-level tariff negotiations. But other countries — like China and Brazil, or the European states that make up the EU — will not take this medicine. They will self-amputate and enroll in physical therapy.

Key Data Points to Consider

Amidst the chaos, there are a few key data points to keep in mind:

From Reuters: “The European Union wants India to eliminate tariffs on car imports under a long-pending trade deal, and Prime Minister Narendra Modi’s government is willing to sweeten its current proposal to seal the talks… ‘The EU has come back asking for a better deal, and India wants to make a better offer,’ said one of the industry sources.” The EU is not turning back. It is embracing a multipolar world and pivoting quickly to establish better trading relations with potential markets.

Also from Reuters: “Several powerful Iranian-backed militia groups in Iraq are prepared to disarm for the first time to avert the threat of an escalating conflict with the U.S. Trump administration.” This comes on the heels of President Trump agreeing in principle to indirect talks with Iran in Oman over its nuclear program. President Trump likely wants to make a deal with Iran rather than start a war in the Persian Gulf.

China has taken off the gloves — retaliating with 34 percent reciprocal tariffs, potentially dumping U.S. Treasuries, devaluing its currency, front-loading fiscal stimulus, and exhorting its people to “focus on doing your own thing.” But according to one commentator writing in The People’s Daily: “The sky will not fall,” and more importantly, China “did not close the door to negotiations with the U.S.” China had four years to prepare for a Trump presidency. It is ready for even higher tariffs than what have been announced… but it is also ready to make a deal with the Trump administration when the White House is ready.

Market Movements and What Lies Ahead

As I type this in the early afternoon of April 7th, the S&P 500 and the Nasdaq are back in positive territory. Bitcoin has pared its losses and is approaching $80,000. The yield on the 10-year Treasury is rising and closing in on 4.2 percent. The dollar is also climbing from its Liberation Day nadir. What happens next depends on the whims of a single man in the White House. If he doubles down on tariffs, the bottom could fall out. If something like the 90-day negotiation reprieve happens, a whipsaw is possible — or even renewed market confidence. My horoscope says it is crucial that I stand up and be a deciding force. It has as much predictive value as anything else in this paragraph.

Geopolitical methodology rejects thinking in such short time periods. I have no insights into what President Donald Trump is feeling or thinking about doing next. I have no one-size-fits-all strategy for my daughter’s teacher or for whoever is reading this. The short term promises to be volatile, unpredictable, and messy — and just how messy depends entirely on the decisions of a single person, which means there is an impossibly huge degree of variance in what is going to happen next.

The Long-Term Outlook

The long term, however, is clear — indeed, becoming clearer by the day. The U.S. will abdicate its role as leader and protector of a globalizing world. Supply chains, trading relationships, and alliances will be upended and remade. The U.S. will remain a powerful, wealthy, and influential country in the world… but global companies that profited from globalization will suffer, and the status of the U.S. dollar and U.S. Treasuries as safe havens will erode. It will be a time of national champions, of vertical integration, of technological and military competition, of scrambles for resources, markets, and advantage.

In other words, it will look a lot like the world usually looks when there isn’t a global hegemon — which has only happened twice in all history: the British Empire in the 19th century and the U.S. between 1990 and 2025. It is a reversion to the geopolitical mean. One can be forgiven for a sense of whiplash — the human mind is not hardwired to accept change easily, and multiple generations have grown accustomed to the present. But the geopolitics that is unfolding for all to see is not the aberration.

That was the last 35 years.

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This information is intended for general educational purposes only and should not be construed as legal or investment advice.