{"id":13714,"date":"2025-04-09T14:49:35","date_gmt":"2025-04-09T14:49:35","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13714"},"modified":"2025-04-14T17:32:30","modified_gmt":"2025-04-14T17:32:30","slug":"3-scenarios-for-how-tariffs-could-play-out","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/3-scenarios-for-how-tariffs-could-play-out\/","title":{"rendered":"3 Scenarios For How Tariffs Could Play Out"},"content":{"rendered":"\n<p><em>Henry A. from Denver, CO asks: <\/em>Hi Mitch, I\u2019m sure you are getting a barrage of emails and questions about the markets and what you\u2019re seeing. Is this a bear market? Where does it all go from here? I apologize I know that\u2019s a broad question but just looking for some insights.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>The short answer for all investors\u2014no matter how much experience you have\u2014is that there is no way to know how bumpy and volatile markets will be in this period. As I write, the S&amp;P 500 has dipped into bear market territory, but we\u2019re also seeing wild swings in both directions.<\/p>\n\n\n\n<p>There is little historical, empirical evidence that tariffs of this magnitude have ushered in economic prosperity. When the Smoot Hawley Act was passed in 1930\u2014which saw tariff rates rise to 20%\u2014it set off a trade war, lowered global trade by nearly two-thirds, and hurt U.S. exports because other countries retaliated. The U.S. economy was already weak when these tariffs were implemented, and the end effect was a colossal blunder.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\">Worried About a Bear Market? You\u2019re Not Alone \u2014 Here\u2019s How to Stay on Track<\/a><\/u><\/strong><br><br>In times like these, knowledge and preparation are your best defenses. That\u2019s why we\u2019re offering our free guide: <strong>\u201c<em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\">Everything You Need to Know About Bear Markets<sup>1<\/sup><\/a><\/u><\/em>.\u201d<\/strong> Inside, you\u2019ll find the key steps to protect your investments and stay on track\u2014no matter what the market does next.<\/p>\n\n\n\n<p>You\u2019ll get insights on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The three categories of bear markets<\/li>\n\n\n\n<li>Investor psychology during a bear market<\/li>\n\n\n\n<li>Preparing for the bull market that always follows a bear market<\/li>\n\n\n\n<li>Plus, more helpful insights to help you navigate downturns, bear markets, economic recoveries, and bull markets<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, get this helpful guide today!<br>\u00a0<br><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\">Download &#8211;\u00a0<\/a><\/u><\/strong><em><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\"><u>Everything You Need to Know About Bear Markets<sup>1<\/sup><\/u><\/a><\/strong><\/em><\/p>\n\n\n\n<p>When similar tariff threats loomed in 2018 and 2019, only about a quarter of the theoretical tariff revenue was actually collected. Why? Businesses found workarounds\u2014rerouting supply chains, shifting sourcing, and negotiating exemptions. The current measures, however, are broader and potentially harder to sidestep, especially with fewer exemptions and more categories involved.<\/p>\n\n\n\n<p>President Trump also appears to be laser-focused on trade deficits, which we eventually discovered was the basis for how the administration calculated the so-called \u201creciprocal tariffs.\u201d It\u2019s the reason the tariff rates ended up being higher than the markets anticipated, and it\u2019s also the reason the markets are responding so adversely.<\/p>\n\n\n\n<p>As mentioned, there is no way to know for sure how this story will play out in the coming weeks and months. But I can offer three potential scenarios for how I think it could unfold:<\/p>\n\n\n\n<ol start=\"1\" class=\"wp-block-list\">\n<li><strong>De-escalation happens from here forward, i.e., deals get announced and President Trump can declare \u2018victories\u2019<\/strong><br><br><\/li>\n<\/ol>\n\n\n\n<p>In this scenario, some tariffs may actually never take effect. This would be similar to what we saw in the first term, when only about a quarter of the theoretical tariff revenue was actually collected as mentioned above. Deals got made, and trade ultimately became freer in the process (save for barriers against China that stuck).<\/p>\n\n\n\n<p>There is also the possibility that the administration\u2019s tariff policy is struck down by the courts. The Supreme Court could rule that President Trump lacks authority under the 1977 International Emergency Economic Powers Act to implement such broad tariffs, which would kick the policy issue to Congress. I\u2019m not sure there would be enough votes to reinstate President Trump\u2019s tariff policy as-is.&nbsp;<\/p>\n\n\n\n<p>Throughout this process, we could see interest rates continue to fall as the administration turns to tax cuts and deregulation as the next phase of economic policy. In my view, markets would likely recover quickly in this outcome.<\/p>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li><strong>Tariffs are enacted but loosely enforced<\/strong><br><br><\/li>\n<\/ol>\n\n\n\n<p>Even if the tariffs go into effect, enforcement might be light or uneven, with many companies receiving exemptions or finding alternate paths around them. In this case, the economic drag would be limited, and markets could stabilize after the initial shock.<\/p>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li><strong>Full implementation and strict enforcement<\/strong><br><br><\/li>\n<\/ol>\n\n\n\n<p>The third and most damaging scenario involves the full application of the tariffs with little flexibility. This would likely lead to prolonged uncertainty, higher costs across industries, and potential retaliation from trading partners. Under this outcome, markets could remain volatile, and economic growth might slow. This is the least likely scenario, in my view, as political pressure and a loud chorus from the business community would ultimately grow too loud.<\/p>\n\n\n\n<p>With market uncertainty at an all-time high, understanding what drives bull and bear cycles is more crucial than ever. That\u2019s why we\u2019re offering our free guide: <strong>\u201c<em><a href=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\"><u>Everything You Need to Know About Bear Markets<\/u><\/a><\/em><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-bull-bear-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_bear_bull_guide_zim_04_10_2025&amp;content=bear_bull_guide\">2<\/a><\/sup>.\u201d<\/strong> This comprehensive guide breaks down the factors behind market volatility and provides practical strategies to help you protect your portfolio during unpredictable times.<\/p>\n\n\n\n<p>Inside, you\u2019ll discover:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The three categories of bear markets<\/li>\n\n\n\n<li>Investor psychology during a bear market<\/li>\n\n\n\n<li>Preparing for the bull market that always follows a bear market<\/li>\n\n\n\n<li>Plus, more helpful insights to help you navigate downturns, bear markets, economic recoveries, and bull markets<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, click on the link below to get this free guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What impact will the Trump tariffs have on the market and economy? Mitch looks at three potential outcomes.<\/p>\n","protected":false},"author":3,"featured_media":13575,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-13714","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13714","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13714"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13714\/revisions"}],"predecessor-version":[{"id":13715,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13714\/revisions\/13715"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13575"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13714"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13714"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13714"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}