Wall Street sees 'reckoning'

Wall Street’s tariff debate has shifted from how high the rates are to how unpredictable the rules have become. Goldman Sachs Chief Executive David Solomon said the uncertainty itself is now hurting business decisions. (cnbc.com) President Donald Trump announced a new tariff package on April 2, 2025, with a 10 percent baseline rate and higher “reciprocal” rates for dozens of countries. On April 9, 2025, he paused many of those higher country-specific rates for 90 days but raised tariffs on China to 125 percent. (cnbc.com 1) (cnbc.com 2) Markets treated the reversal as relief, but not clarity. The Standard and Poor’s 500 jumped 9.5 percent on April 9, its biggest daily gain since 2008, after several days of losses tied to trade fears. (usnews.com) Goldman Sachs also raised its 12-month recession probability to 45 percent on April 6, 2025, up from 35 percent and from 20 percent earlier that same week. Reuters reported the bank tied the change to tighter financial conditions and rising policy uncertainty from the escalating trade war. (finance.yahoo.com) That is the break with the old market script: investors can usually price a tariff rate, but they struggle to price a tariff regime that changes within days. Solomon said on Goldman’s first-quarter 2025 earnings call that fears about the “escalating effects of the trade war” had created “material risks” for the United States and global economy. (aol.com) Companies said the pause did not settle the issue. Reuters reported on April 10, 2025, that business leaders were still dealing with soaring costs, falling orders and snarled supply chains after the White House’s tariff reversal. (usnews.com) Goldman’s own research had already framed the move as bigger than a normal trade dispute. In an April 21, 2025 note, the bank said the administration’s tariff moves had “upended decades of U.S. trade policy” and triggered a rapid reassessment of the United States and global outlook. (goldmansachs.com) The bank has also argued that the scale is historically unusual. Goldman Sachs said average tariffs on United States imports were heading to levels not seen since the Smoot-Hawley era, putting the current disruption well beyond the tariff fights of Trump’s first term. (goldmansachs.com) Not every Goldman analysis has pointed to an immediate collapse in activity. A separate Goldman Sachs research note published in 2025 said the effect of trade uncertainty on actual economic activity was “barely visible” at that point, even as tariff announcements drove a surge in uncertainty. (goldmansachs.com) The immediate test for Wall Street is whether tariff policy settles into something companies can plan around. Until that happens, the market’s focus is likely to stay on the next policy turn rather than the posted rate itself. (cnbc.com)