The Decibel - Global markets reel from tariff whiplash

Episode Date: April 10, 2025

Last week, U.S. President Donald Trump announced sweeping global tariffs on most of the world, plunging markets into some of the worst days in recent memory. The tariffs took effect yesterday, but after hours of market volatility, the White House reversed course. Trump announced a 90-day pause on his initial tariff plans, instead issuing a 10-per-cent tariff on all implicated trading partners other than China. Instead, Trump doubled down by raising tariffs on Chinese goods to 125 per cent. All of this uncertainty has led to chaos in global markets.Tim Kiladze, a financial reporter and columnist for The Globe, is on the show to make sense of what’s going on in the markets, and what all this means for global trade.Questions? Comments? Ideas? E-mail us at [e-mail]

U.S. President Donald Trump continues to sow chaos with his changing tariffs. Last week, Trump rolled out a big chart announcing sweeping global tariffs on imports from most of the world. Those took effect yesterday. But after hours of market volatility, the president reversed course. Sort of. Trump announced a 90-day pause on those first tariffs from the chart. Instead, those countries would be subject to a 10% rate.

Except for China. Tariffs on goods from China went up to 125%. This uncertainty has had a significant impact on global markets. After the initial announcement last week, markets had their biggest one-day percentage loss since the early days of the pandemic. About $6 trillion US in market value was wiped out. And after Wednesday's announcement that tariffs would be reduced, one index, the S&P 500, had its best day since 2008. The tech-heavy Nasdaq had its best day since 2001. The Trump administration is reshaping global trade

with these tariffs. What's not clear, though, at this point is what exactly they're trying to accomplish. And I really think we're helped a lot by the tariff situation that's going on, which is a good situation, not a bad. It's great. It's gonna be legendary. You watch? Legendary in a positive way,

I have to say. Tim Collatz is a financial reporter and columnist for The Globe. He's in New York right now reporting on how all of this is playing out. Tim is here today to help us make sense of what's going on in the markets and what this all means for global trade.

I'm Maynika Raman-Wilms, and this is The Decibel from The Globe and Mail. Tim, thanks for being here again. Happy to, although to be honest, I wish it was under better circumstances. Well, we're going to talk about that because you're actually in New York right now. You and I are talking Wednesday morning. Since last Wednesday when Trump announced tariffs on much of the world, we've seen some fluctuations here. What has happened in the North American markets? In the past week or so, ever since liberation day, which is when Trump announced, you know,

what he calls reciprocal tariffs in other nations, but has been widely seen as, you know, just flagrant abuse of trade rules or tariffs as negotiating tactics. Markets have really tanked. They've corrected. And if I'm trying to be fair and I want to be, because I think it's easy to panic and we never want to panic, the market is just back to where it was last spring, probably the best way to put it. And the market after last spring had gone on a huge tear.

So you could argue that in you know, in normal times, if the market went up like 5 to 8% a year, like that was a good thing. Recently, we've had years, the market's up like 25%, which is like borderline insane in a way. Like that's just not normal. So to be flat for a year is actually not the worst thing in the world. So it evens out, but we've seen kind of dramatic rise and falls though, right?

Like how far have we seen it drop and increase in the last week or so? It's dropped a lot. I think the biggest thing is the speed of the drop because up until about mid February, which is not even long ago, that's like less than two months ago, investors were still kind of hopeful that this trade war was more bluster than anything. And since then, there's just been a rapid realization that, oh my God, they're serious about this. There was just a quick realization that we might be in for something much bigger than

most people were anticipating. Yeah. Can you just really spell it out for us here, Tim? Why would tariffs cause the market to react in this way? At the end of the day, it boils down to the fact that it just makes things more expensive. But the real deeper issue, and this is what is kind of playing out in markets now, and it's not just stock markets, which is what the average person tends to kind of think about when they think about markets.

It's also playing out in the bond market, which is way bigger than the stock market. But it's usually only traded in by kind of like institutional investors. But those institutional investors are us. Like, you know, the Canada Pension Plan has a huge investing arm and they own bonds, you know, that's just one example. And bond the bond market is often seen as more stable, right? So if we're seeing fluctuations there, that seems like a big deal. Yeah, exactly.

And it's usually historically, you know, been these smart, sophisticated investors who were in it. So when they're panicking a little bit, which is kind of happening now, that's when you start to be like, what is going on? You know, like, what are they seeing? What has made them change? But to get back to your question for a sec, the idea of tariffs beyond inflation is that it's just going to slow global commerce, global trade, global business. Companies just

aren't gonna make investment decisions or hiring decisions. Everyone's just in wait-and-see mode and that is a problem because it just kind of pumps the brakes on the economy and at the same time there's been so many fears that like things were too good for too long and something had to change. And now people are like, something is changing. And that's when panic can set in. Yeah, it sounds like what you're saying is it kind of comes down to this unpredictability factor, which you were talking about the last time you were on the show with us. Have there

been other times, Tim, that that we can look to where we've seen markets react like this in the past? I don't want to cause panic, but the last few times we've seen such major drops, and so quickly again, the quickness is the major factor or major variable was the 2008 global financial crisis and during the first early days of COVID. And to be a bit hopeful right now, what I think is playing out and what you can see playing out is that investors themselves are still hopeful. So even earlier this week, there was a trading day where all of a sudden the market was up like 3 to 4 percent in the morning on hope that the US wasn't going to be as serious about trade as it may just be. That of course reversed by the afternoon and they were down like 2%.

But the fact that it could swing up so much shows that people are kind of just hoping this is a bad dream. People are just kind of like, I got money, I'm willing to deploy it, I just need certainty that things are gonna be okay. The fear is that over time, that certainty chips away bit by bit and people are like, oh no,

this is way worse than we were thinking. And that is kind of what is playing out right now. And that's the scary part. You know, everybody's looking for a comment or two of just like, you know, they kind of want an overarching message saying, we don't want to have to use tariffs. We just want to have to use tariffs.

We just want to have fair trade. Something along those lines. The problem though is if you add up all the statements that the US or the White House in particular is making, it seems like they're in this for the long haul. So how is this playing out in like the Asian markets and I guess the European markets as well? We talked about North American stocks, but yeah, what's happening in other parts of the world? Well, so for the last little bit, there had been this narrative forming that US markets

were in decline and the rest of the world was faring either decently or faring pretty well because you looked at European markets and they were up, you know, the timeframe matters here because everything's kind of falling now, but still doing much better than the U.S. And even Canada has not seen as bad a decline as the U.S. has seen. In Asia, you know, Japan had actually been this beacon of hope in markets for a while. Then it started to tank, but then as soon as Japan said that it was going to negotiate with the U.S., it recovered. If you want the one-liner, it's effectively, U.S US has been bad, rest of the world has been good or okay. The question is, how

long can that last? Because the US is such a major player, you know, it's kind of like the wealthiest at large when it comes to economic growth, and if they struggle, the rest of the world can't really escape that. Yeah, well as you seem to say, because the US is so big, like it is it is affecting countries around the world. Right. So I know this is a big question, Tim, but with with all of this market volatility, like how do we even begin to make sense of this, of what's happening right now? It's really hard to and not even the experts know.

And that is the scary part, because at the end of the day, every system in the world depends on norms. And there's just certain rules you don't break because when you break the rules, it causes chaos. And it's like the world today has become that or is becoming that. And that's the really scary part. Like these lines are being crossed

that just were not crossed before. Yeah. And the fear is that there is no grand strategy. You know, like if Trump was going to use tariffs as this negotiating tactic, which was the thinking, then it's like, OK, people get that. You're going to have to give up some concessions to the US. But they realize they can't go too far or else the global economy is going to tank.

Well, countries are doing that. They are trying to give up some concessions. Think about Canada. We put the fentanyl border czar up and agreed to spend a billion dollars or whatever it is and then the rules just change. All of a sudden they're like, no, no, no, no, no, Canada is so unfair to us. And you get to a point you're like, what do they want? Anything you're playing in a negotiation in poker poker you always kind of have to know what the other side is where their pressure

points are and also understand that there's got to be a bit of compromise and right now it's just a one-way demand and no one can make sense of it. We'll be right back. We'll be right back. All right, so Tim, let's talk a little bit more about the grand strategy that might be behind the decision making in the White House. Because we've seen markets react quite drastically to Trump's actions, right? So I guess I'm wondering about the reasoning here. Do we have any indication of what Trump is trying to accomplish?

My best guess now, and I think everyone has a best guess, everyone is guessing, I should say, because you're seeing more and more reports and people I've talked to, like very senior business people who are deeply connected in the US have been saying, like, we don't have an in on the White House. Like, and there's been reports in the US here About you know, like big bank CEOs have not been able to even talk to him or talk to the White House And I'll give you another anecdote when I was in Washington at one point We had to contact Commerce Secretary Ludnick who's kind of been a lead guy on trade or tariffs for Trump for comment

And I was talking to somebody who's deeply connected in Washington in the press pool there. And I just said like, hey, what's the best way to reach out to them? The message back straight up was there is no way to reach them. And that's when I was like, whoa, it's a go. Again, it's this one way street.

No one ever hears anything back. So to get back to your question about like, what is the grand strategy? I think people need to go back. And if you really care, you can do some reading on what Peter Navarro thinks. That's like the best advice I can give to people. He's kind of this informal trade advisor, essentially to Trump. Yeah. And what's been interesting lately is Navarro is coming out in the front again, kind of almost like speaking more than Lutnick, because there's been a lot of frustration with Lutnick because people feel that he's been a bit almost too aggressive.

So now on American TV this week, it's it's Navarro again, and you can have a bit of deja vu because Navarro was the guy in the first administration of Trump who was out there, you know, kind of banging the table on tariffs. And his major thinking is that to be a strong nation and to be able to defend yourself, you need strong manufacturing. And that's so you can produce things for like defense industries. You need things like pharmaceutical manufacturing. And that ties back to like, you know, if you have a global pandemic,

you need to be able to have plants that can produce vaccines. So he's actually in the past laid out a number of industries that they think are crucial to just effectively being a strong nation. And I think that that is why you're seeing such adamant language from the White House, including on autos, which deeply affects Canada and Mexico. They're basically saying we can't even trust allied training partners because at the end of the day all we have is ourselves. If the world blows up, all we've got is ourselves and we need to have the whole thing, the whole supply chain within the US.

Okay, so the idea kind of is force companies to bring their manufacturing back to the US to strengthen the economy in the US then. Yeah. I hate to say this, but it's just insane. Think about how World War II was won. You had to kind of come together and that is how things like NATO got formed and the Western Alliance got formed.

And so they're just shredding this history that has benefited the US and that's the most confusing part. Something that I find really interesting here, Tim, is that a lot of business people back Trump when he was running for office, right? Like, there's been this idea that Trump is going to be really good for the economy. So do we know what they think of all of this now, since the markets have been so heavily

affected? For the longest time, you know, the really rich were not speaking out. And so there was hope that, you know, they were getting through to him kind of behind the scenes. But more and more you're learning that that's just not the out. And so there was hope that, you know, they were getting through to him kind of behind the scenes. But more and more you're learning that that's just not the case. And so now you're seeing some of them go public. And it's almost like they're not scared of having retaliatory measure using trade terms against them by Trump because they think that if this continues, it's just going to be just as bad as whatever retaliation the White House could give.

So I think people are deeply scared now. And people like Bill Ackman, who went hardcore for Trump during the election, are now saying like, Mr. President, like, you cannot do this. Same thing with Elon Musk. Like, he's now come out against Peter Navarro. You know, this guy that's now out kind of waving the terror flag, saying like, Peter Navarro knows nothing. You know, he's like tweeting saying like,

this is ridiculous. So it sounds like, like billionaire business people who supported Trump, they didn't exactly expect this to happen then. Yeah. And that's something I'm personally trying to make sense of and personally trying to report on. Like this idea of like, well, what were they thinking thinking because if you go back in time, you know Trump

Has been talking about tariffs since the beginning of the 2024 campaign and we all were just ignoring it or Believing it was just bluster, you know hoping it was just bluster, Tim, all of this seems to point to the US entering a protectionist era. What does global free trade, what might it look like without the US there? So it's almost impossible to think of what having the US cut off from global trade could look like. One thing I would caution is that it's also just not possible.

Or if it is possible, it's gonna take years to reorganize trade. Like, you know, you've had, if you think about autos, you've had auto manufacturers and auto suppliers say, like, we cannot just move to the US, build a plant, like spend hundreds of millions of dollars building a plant, finding land, all that kind of stuff, in two months. You know, it takes years.

And the bigger thing now is everyone's kind of sitting around and watching, well, what's going to happen in U.S. midterms? Because if if the House and Senate flip, you know, you get Democrats controlling both, they might wrest back control of trade from Donald Trump because he's been using national security measures to kind of get this all done. But they could change that. And then if that changes, or even if the Republicans lose in 2028, it would be,

they might reverse all of these tariff policies. And so why spend hundreds of millions of dollars now when it's not even gonna matter in a few years, if you're a company? So everyone is just kind of sitting around wondering and waiting as everything kind of implodes from the inside.

Well, it sounds like even, you know, even if it does reverse in a few years, like we are kind of in this tumultuous period right now. Without the US in the central economic position, is there another country poised to take its place? This is the ironic thing. Well, there's lots of ironic things, but this is one of the big ironic things is that this might actually help China long-term, which is very much not a US goal.

And over time, like I'm already hearing it in Canada, even just from friends, people are just saying, well, like, well, maybe we should just ship more to China. Maybe we should just align more with China. Like if the US is gonna not gonna be there for us, align with China. And if that continues bit by bit over two decades, it could be a complete reorienting of the world.

Of course, there are other options, right? We can realign more with Europe, which I think people are already talking about. And you've seen Prime Minister Carney try to kind of forge more of that alliance. The tough thing for Canada is that there's a saying in geopolitics that geography is destiny. You know, we have two major oceans between us on both sides. The US has always been so convenient because it's right there. So for Canada, cutting the US out of the equation, like we had a big debate about this in the

newsroom recently, and I was just like, guys, I don't know. I just don't think it's possible. Or if it's possible, it's going to take decades. You know, it's not a switch you can just flip overnight. I think the big question on a lot of people's minds, Tim, is how likely is it that we are all headed for a recession right now? So go back two years, 2023, because of things like inflation under the old economic model, the old economic textbooks, a recession was supposed to hit. It's just kind of the way these things work. And it didn't,

that is partly what sent markets roaring even more. Two things have changed. One, economists now are all of a sudden like, oh, they're serious about this trade war. And that can just, for all the reasons we've talked about, stifle investment, cause uncertainty, et cetera, makes people pull back. And therefore, you have less spending, recession hits. It's kind of that simple. On top of that, though, what people have not paid enough attention to is for all this chatter

about the US economic miracle, it was fueled by crazy government spending. The US has a deficit amounting to like $2 trillion a year. Like I'm not making that up. It's like it's legitimately $2 trillion a year, which the best way to think about is equivalent to what you would spend during like a Great Depression to save the economy. You know, maybe I'm, you know, exaggerating there, but it's in the ballpark. So we've literally been like depression level spending to simulate things.

And that is what Trump wants to cut back on. And that's what the Treasury Secretary Scott Besson wants to close. And understandably so that, again, with Trump, there's always a kernel of truth to what they are saying. And so they need to fix the deficit. The problem is the way they're going about is with tariffs, which is a tax, and, you know, that's causing all this chaos. But all you need to know is if you pull back on the government spending,

if you close that deficit, that juice in the economy is gone. And that could have huge effects. So Tim, very lastly, before I let you go, what does this all mean for Canadians? There's going to be a lot of uncertainty for quite some time. I'm trying to use some measured words there because you really don't want to go to the dark place. And there is still some hope that, you know, if things get really messy in the U.S. over the next six months, the White House might have to pull back. The scary part, and this again is what nobody knows, but it's becoming more and more of

a theory is what if Donald Trump is convinced that this is what is good for the US long term? And this is where you have kind of the autocrat and dictator analogies crop up. And I'm always hesitant to kind of talk too much about them. But I think it's important to raise them. You know, if you look at what's happened in like Hungary or Turkey, or yes, even Russia. There's some very similar behaviors. And the one that I'm worried about personally is if you think about Putin and the horrible attack on Ukraine, he's let by many verifiable estimates, let hundreds of thousands of Russians

die for what he believes is this greater good of, you know, restoring Russian land. I'm summarizing it. What if Donald Trump and Peter Navarro really think that for all the pain that will cause economically, it'll be worth it. And I'm not just making this up. They have said this. It's just that everyone thinks their hopes that maybe they're just kind of floating this

to put on a brave face. But Donald Trump has said like the stock market doesn't matter. This will be good. Some pain will be worth it. And if he sticks with that mentality, that is a real problem. Well, Tim, kind of a scary place to end, but we will have to leave it there. Thank you so much for taking the time to be here. Always always happy to.

Now that the federal election campaign is officially underway, we want to hear from you. Throughout the campaign, we'll be answering your questions about the leaders, the stories, and the issues. If you have a question for us, send us an email or a voice note to thedecibel at globanmail.com. We'd love to hear from you. That's it for today. I'm Maynica Ramon-Wilms. Our associate producer is Azra Souter. Our intern is Olivia Grandy. Our producers are Madeleine White, Michal Stein, and Ali Graham. David Crosby edits the show.

Adrian Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.