Yardeni Flags “New World Disorder” as Tariffs and Fed Attacks Fuel Market Angst

Yardeni Research warns that President Trump’s aggressive tariff strategy and persistent attacks on Fed Chair Jerome Powell have upended the global economic order—coining the term “New World Disorder” to capture the widespread uncertainty fueling investor unease.

1. Trump’s Tariff Turmoil

• Breadth of Negotiations: The U.S. is in talks with 15 major economies—from Japan and the EU to South Korea and India—with 75 countries seeking trade negotiations.

• Key Levies (effective April 3):

  1. 25% on steel imports

  2. 25% on aluminum

  3. 25% on cars, trucks, and certain auto parts

  4. 25% on non‑USMCA‑compliant Canada/Mexico goods

• Market Ripples:

  • “Liberation Day” Rally (April 9): Stocks leapt after Trump paused reciprocal tariffs for 90 days—except on China.

  • Ongoing Drag: The looming specter of renewed duties has kept equity markets depressed since April 2.

• Technology Impact:

  • Nvidia (NVDA) and AMD (AMD) now face export‑license hurdles on AI chips—estimated to cost up to $5.5 billion in potential sales losses.

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2. Trump vs. Powell: Fed Independence Under Fire

• Presidential Pressure: Trump’s team is exploring the legal avenues to remove Fed Chair Powell—undermining confidence in U.S. monetary policy.

• Inflation vs. Growth: Powell has resisted near‑term rate cuts, citing tariff‑induced inflationary pressures; Trump counters this stance as “too late.”

• Political Risk Premium: Markets now price in a higher chance of policy volatility, amplifying yield and currency swings.

3. U.S. Economic Mixed Signals

• Consumer Sentiment: Falling, yet retail sales have surprised to the upside.

• Production Data: Industrial output dipped in March, but manufacturing and mining saw modest gains.

• Recession Watch: Elevated fears as mixed data complicate the Fed’s dual mandate of growth and price stability.

Market and Sector Impact

• Equity Volatility: Defensive sectors (utilities, staples) have outperformed, while cyclical stocks (industrial, tech) remain under pressure.

• Safe‑Haven Flows: Gold and Treasury yields reflect a renewed flight to safety amid policy uncertainty.

What’s Next

• Tariff Developments: Watch for the outcome of the 90‑day pause and any new exemptions.

• Fed Communications: Minutes from the next FOMC meeting will be scrutinized for signs of political interference.

• Economic Releases: Key U.S. reports—PMI, retail sales, and inflation—will test the resilience of the mixed recovery.

This New World Disorder underscores a pivotal moment: policy unpredictability has become as market‑moving as traditional economic shocks, leaving investors scrambling for clarity in an increasingly fractured global landscape.