President Donald Trump’s first day in office brought some relief to Wall Street despite his protectionist trade agenda. Trump did not establish any new tariffs on his first day; instead, he launched federal investigations into America’s trade deficit and the trade practices of China, Mexico, and Canada. Investors saw this cautious approach as a sign that Trump might adopt a more limited tariff policy.
The Dow Jones Industrial Average, S&P 500, and Nasdaq ended the day higher, while shares in Europe and Asia also made modest gains. However, the relief may be premature. Trump continues to express a strong commitment to addressing America’s trade deficit.
In a comment to a reporter, he suggested that tariffs on Canada and Mexico could be imposed as soon as February 1. Trump’s Day 1 actions reflected an internal conflict within his administration over trade policy. Arch-nationalists had pushed for a declaration of a national emergency on trade, which would allow Trump to rapidly enact steep tariffs.
Wall Street cautiously optimistic on Trump
However, Trump chose a more moderate initial approach. Investors responded positively to Trump’s restrained actions.
The president kept his protectionist promises vague while making more concrete pledges on other policy fronts, such as revoking emission restrictions on new vehicles. There are reasons to believe that Trump might eventually moderate his trade policies. Radical trade policies would benefit virtually no major interest group within the Trump coalition.
Trump has also historically been obsessed with the stock market’s performance, and such policies would likely harm both his donors and voters. For now, Wall Street’s relief hinges on the hope that Trump will continue to show restraint in his protectionist agenda. However, his comments and historical unpredictability keep investors wary about the potential for sudden changes.
Trump’s pending trade memorandum and future decisions will determine the balance between his protectionist instincts and his desire to maintain a booming stock market. The International Monetary Fund and analysts have warned that Trump’s policies could disrupt global trade and potentially backfire on the U.S.