The market is overreacting, White House says. That depends on how tariffs evolve.
Summary
White House economist Stephen Miran says he “thought more of that was priced in.”A whipsaw trading day in the financial markets Monday left traders and investors trying to figure out what could be next. But the White House said it isn’t concerned and plans to keep going with its tariff strategy.
“Given the scope and speed with which the president has acted on tariffs, it isn’t surprising that there would be financial-market volatility," said Stephen Miran, chair of the White House Council of Economic Advisers, in an interview.
Still, the scale of the volatility was unexpected, Miran said. “I thought more of that was priced in," by the time of the April 2 tariff announcement, he said.
The Trump administration is pushing ahead with simultaneous trade negotiations with dozens of countries, despite some investors’ concerns. Stocks ended Monday mixed, with the tech-driven Nasdaq up 0.1% and the S&P 500 down 0.2%, while the Dow Jones Industrials fell 0.9%. But there are signs of unusual activity in other asset classes, including the dollar and the Treasury market, and market stress is likely to continue as negotiations draw out over days and weeks.
The DYX dollar index rose and fell in intraday trading Monday, ending the trading day up 0.6%. The 10-year Treasury yield had a similarly complicated path, ultimately rising to near 4.2%.
One source of worry is the possibility of simultaneous declines in stocks and government debt. Bond prices move inversely to yields.
Financial-crisis historian Adam Tooze said in his newsletter Monday that he didn’t believe a crisis was imminent. But if one were to transpire, it would come as both of those assets fell. “If Treasuries are falling in price, as well as equities, then there is no safe hiding place and the panic becomes comprehensive. It is like a mega bank run on the entire financial system," Tooze wrote.
Veteran investors were hesitant Monday to declare an end to the market turmoil. “There won’t be universal agreement on whether this was the ‘wash moment’ that allows the markets to establish greater stability—and for good reason," said Mohamed El-Erian, chief economic adviser at asset manager Allianz, in a social-media post. “The underlying causes of the volatility are themselves fluid."
“There is an element of markets overreacting to the tariffs," says Stephen Miran, chair of the White House Council of Economic Advisers.
That fluidity stems from the unusual policy process. Trump is personally directing the tariffs, and is the only one who can say when they will end. A meeting this afternoon between Trump and Israeli Prime Minister Netanyahu didn’t yield reductions in U.S. tariffs, even though Israel has agreed to reduce its trade deficit with the U.S. to zero.
Kevin Hassett, director of the White House National Economic Council, said in a Fox News interview Monday that the U.S. was negotiating with 50 countries.
Trump and other administration officials have described the transition process to a new global trading regime as potentially painful but worthwhile for the economy in the long run. Treasury Secretary Scott Bessent made remarks in a recent interview on former Fox host Tucker Carlson’s podcast that some read as welcoming the stock pain.
“Look, I’m not happy with what’s going on in the market today, but [this is] the distribution of equities across households: The top 10% of Americans own 88% of equities, 88% of the stock market. The next 40% owns 12% of the stock market. The bottom 50% has debt," Bessent said.
Bessent has said he is focused on the level of the 10-year Treasury yield, which at above 4% is making consumer debt hard for some to bear.
The idea that the White House is deliberately engineering a fall in the 10-year yield, or that it welcomes the stock market decline, is ridiculous, Miran said, countering some market rumors.
“Declines in the stock market have unwanted negative knock-on effects on the economy, negative wealth effects, problems with credit, whatever, those are bad things. Part of the reason to be concerned about bond yields is to prevent that from happening. The idea that you would cause the bad thing in order to get bond yields down is really misguided," Miran said.
He added that he thinks “there is an element of markets overreacting to the tariffs." The S&P 500 has fallen 10.7% over the past three trading days.
Whatever the White House thinks of the market effects of the tariffs, President Donald Trump shows no sign of changing his trade policy as a result. Trump announced new 50% tariffs on China Monday in response to China’s retaliation, indicating that a trade war could get worse before it gets better.
But what that will mean for the market isn’t clear day-to-day. U.S. stock market futures were up about 1.5% Monday evening.
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