Another week, another seemingly chewed-up 'tariff deadline' by the market. August 1, Friday. Unless a miracle occurs—achieving a new trade agreement or the deadline being forcibly postponed—the U.S. tariff club will hit core trading partners like the EU, Canada, and Mexico hard. A strange numbness permeates Wall Street: 'Tariffs? Old news!' 'Deadlines come and go, the sky hasn't fallen.' This pervasive sense of weariness has almost become a consensus, a dangerous self-hypnosis.
Absurd! This collective pretending to sleep is simply outrageous!
When the entire market is drowsy, thinking the tariff issue has become a 'dead dog' unable to stir waves, Morgan Stanley's warning is like a bucket of ice water: Wake up! The eye of the storm is forming, and its destructive power far exceeds your numb imagination! The truly deadly shockwave has just begun to brew.
This time, it’s truly different! Look at the targets this time—EU, Canada, Mexico. These are not inconsequential actors; together, they account for nearly half of U.S. imports! Imagine, simply imposing an additional 5% tariff on these three giants, the fierce bite on U.S. GDP would be twice as powerful as similar measures on some small economies! This is not just a scratch; it’s a direct stab at the heart of the economy! Those who thought the data could still 'hold steady' should completely shatter that illusion—the most painful transmission often quietly begins after the storm.
Tearing Apart the 'Three Faces' of the U.S. Economy: Which one will grin after August 1?
'Stagflation' Ghost (40% Probability): The most likely nightmare scenario! Growth continues to bleed, while inflation stubbornly clings like a maggot. Don't expect any glamorous recession; this is the torment of a dull knife cutting flesh. The suffocating effects of trade shackles and high immigration walls will brutally crush any meager stimulus brought by relaxed regulations and fiscal blood transfusions. A mire devoid of vitality, with soaring prices, is beckoning.
False Dawn (20% Probability): Animal Spirits 'Return to Light'? Unless the trade war monster suddenly softens, the immigration door creaks open again, or fiscal stimulus truly turns stone into gold, igniting the legendary 'animal spirits.' But the reality is, just look at the combative face of the White House, the possibility of this script is minimal! A slight tailwind cannot change the overwhelming current.
Recession Express (40% Probability): Tariffs are the final step on the accelerator! Do not underestimate the destructive power of the hammer dropped on August 1! The current tariff rates already tighten the economic neck like a rope; if another severe blow is dealt to the most important trading partners—don't forget, these partners are not lambs awaiting slaughter, their countermeasures are already sharpened—this broken vehicle of the American economy will most likely lose control and slide into the abyss of 'mild recession'! The so-called 'serious recession risk reduction' placebo is laughably pale in the face of real trade nuclear explosions!
Market Thunder: Your wallet will tremble in this rift!
Bond Market and Dollar: Safe assets revel, dollar hegemony collapses? Once tariffs kick the economy into slowdown or recession, the 'hawkish' mask of the Federal Reserve will shatter instantly, and dovish cries will surely ring out. Frenzied safe-haven funds will rush towards U.S. Treasury bonds as if they have found a lifesaver, driving up prices. Worse, the dollar depreciation alarm that began at the start of this year will sound heavily; the downward trend will be like floodgates opening! Overseas investors watching dollar assets turn into hot potatoes will frantically hedge their exposures, only deepening the darkness of the dollar's fall.
U.S. Stocks: Heaven and Hell in a Thought, Industry Mass Exodus Begins! Don't be fooled by the possible 'strength' of the market! The surface index may be barely hanging on, but it cannot conceal the bloody mass exodus of industries underneath:
Industrial and Capital Goods 'Iron Throne': These giants hold pricing power, able to pass the increased costs of tariffs onto downstream customers like garbage. More 'fortunate' is that they can lie on the warm bed of increased domestic investment counting their money! Winners take all, cold and ruthless.
Consumer Goods and Retail 'Slaughterhouse': This is the real purgatory! Import costs are skyrocketing like a rocket, but do they have pricing power against budget-conscious, furious consumers? Almost none! Profits will be squeezed dry, and blood will flow like rivers as the norm. If not escaping now, when will you?
When the clock strikes zero on August 1, as the White House's decision falls like the sword of Damocles, the market's numbness will be utterly shattered by the iron fist of reality. Those who are immersed in 'tariff fatigue' will eventually be sharply awakened by the violent sector rifts, the howling dollar devaluation, and the cold realities of stagflation or recession.
This tariff storm ignited by arrogance doesn't care whether you are tired of it. It only cares if the power of destruction is thorough enough.
When the bell tolls on Friday, guess what’s sitting on the White House desk: a trade agreement? Or that economic 'nuclear button' capable of flipping the global supply chain? Is your investment truly ready to face this inevitable rift?