President Trump reignites trade tensions with new tariffs

New tariffs are set to take effect, impacting various sectors including imported drugs, kitchen cabinets, upholstered furniture, and big trucks. A proposed policy for chip makers mandates domestic manufacturing equivalent to overseas production, with tariffs as a penalty. While the trade war appears to be reigniting with new focus areas, the AI-driven market hype is considered significant, with substantial growth expected in AI and its supporting industries.

The proposed tariffs on pharmaceuticals include a loophole for companies building new plants in the United States, potentially mitigating the impact. Other tariffs, like those on large trucks, may have an effect, but historical data suggests previous tariffs haven't caused the expected inflationary effects. The political implications are also noted, with specific industries like furniture manufacturing potentially being targeted due to their importance in politically significant states.

Market reactions to these tariffs have been mixed, with some pharmaceutical stocks seeing a boost due to US manufacturing investments. Furniture companies relying on foreign imports have faced pressure, while US-based manufacturers have benefited. Freight stocks show a varied response, and overall stock futures are up, contrasting with previous negative reactions to tariff announcements. The market seems to be digesting the news with less immediate downside impact than anticipated, partly due to skepticism about full implementation and nuances within specific tariff categories, such as the exclusion of generic drugs from pharmaceutical tariffs.

New Tariffs and Their Scope [0:00]

• A slew of new tariffs will take effect on October 1st.
• These include a 100% tariff on some imported drugs, 50% on kitchen cabinets, 30% on upholstered furniture, and 25% on big trucks.
• There's also a reported plan to mandate a one-to-one policy for chip makers, requiring them to manufacture as many chips in the US as they do overseas or face hefty tariffs.

The trade war is perceived as back, with new sectors being targeted by upcoming tariffs.

The tariff war isn't over just yet.

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AI Hype and Market Vulnerabilities [1:06]

• Questions arise whether AI-driven hype is enough to offset market vulnerabilities from new tariffs.
• The AI hype is considered real, and the market is likely still in the early stages of its growth, akin to "batting practice."
• Tremendous growth is expected for AI and its supporting industries, with growth expectations for technology over 20% for 2026, significantly higher than the S&P 500's 13%.

Investors are expected to continue focusing on these high-growth areas despite market uncertainties.

Our belief is we're probably still in batting practice.