Dollar decline, tariff tantrums and hair-trigger volatility could snap the stock market Trump’s tariffs stunned Main Street. Now they may starve Wall Street.

 

Dollar Decline, Tariff Tantrums, and Hair-Trigger Volatility Could Snap the Stock Market
Trump’s Tariffs Stunned Main Street. Now They May Starve Wall Street.

By Steven Orlowski, CFP, CNPR

In a fragile post-pandemic economy already struggling under the weight of inflation, geopolitical tremors, and monetary policy whiplash, Wall Street investors are bracing for a new kind of threat: policy-driven market chaos. Donald Trump’s revived promises of sweeping tariffs—if he returns to the White House in 2025—are rattling the markets, stirring fears of a dollar decline and reviving volatility levels not seen since the COVID crash.

While the former president’s America First trade stance once resonated with struggling small-town manufacturers, the financial markets now see it as a ticking time bomb. Tariffs that once stunned Main Street may soon starve Wall Street.

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The Tariff Time Bomb

Trump’s campaign rhetoric has been nothing short of aggressive: a universal 10% tariff on all imports and a potential 60% levy on Chinese goods. The intention, he argues, is to revive American industry and reduce trade imbalances. But in practice, such sweeping tariffs function more like taxes on U.S. consumers and businesses. They raise input costs, slow corporate earnings growth, and risk retaliatory measures that choke off export demand.

For equity markets, these policies aren’t just inflationary—they’re destabilizing.

“Tariffs of this magnitude would act as a brake on corporate margins and a throttle on global trade,” said Mark Lindberg, a senior equity strategist at Silvergate Advisors. “In an already nervous market, the reintroduction of trade wars is like throwing gasoline on smoldering embers.”

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Dollar Doldrums

The U.S. dollar—long the cornerstone of global economic stability—has begun to wobble under the weight of speculative fears. Currency markets are forward-looking, and the potential for isolationist policy has sparked renewed concerns about the greenback’s dominance.

A tariff-fueled slowdown in global trade would likely suppress demand for U.S. dollars, which are needed to facilitate cross-border commerce. Coupled with ballooning deficits and a growing reluctance from foreign investors to absorb U.S. debt, the dollar’s status as a safe haven may no longer be sacred.

“If we weaponize trade policy, the world may start to question the reliability of the U.S. as a trading partner,” warned Emily Roth, a currency strategist at Meridian Capital. “That’s how dollar hegemony begins to unravel.”

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Hair-Trigger Volatility

Markets are increasingly ruled not by long-term fundamentals but by short-term signals—tweets, headlines, and algorithmic cues. The Trump-era volatility, which saw the Dow swing by 500+ points in a single tweet, is a memory investors would rather not relive. But with campaign rhetoric heating up and trade policy uncertainty looming, hair-trigger volatility is making a comeback.

Equity volatility, measured by the CBOE VIX index, has already begun creeping upward in anticipation of a contentious election season. Add the possibility of erratic trade measures, and markets could be in for a wild ride.

“Uncertainty is kryptonite for equity valuations,” said Jenna Shaw, a portfolio manager at Nova Asset Group. “And right now, we’re looking at political, fiscal, and geopolitical uncertainty converging all at once.”

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Main Street to Wall Street: A Broken Supply Chain

Trump’s trade policies were originally touted as a boon for American workers. But in practice, many of those gains proved short-lived. U.S. manufacturing saw temporary boosts, but retaliatory tariffs, disrupted supply chains, and rising costs soon eroded those benefits.

Today, the effects linger like a long hangover. Many small businesses that once applauded Trump’s tough stance on China now fear being caught in the crossfire of a global economic slowdown. Meanwhile, Wall Street is calculating the ripple effects on earnings, global demand, and inflationary pressure.

With Main Street still feeling the burn, Wall Street may be next in line.

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Investors, Take Cover

Whether Trump wins or not, the specter of protectionist policy is back on the table—and markets are taking notice. Investors should brace for volatility spikes, review sector exposure (especially to international trade), and consider hedging against currency risk.

While the next few months may bring clarity, they may also bring chaos. The question is not whether policy uncertainty will affect the markets—it’s how much, and how fast.

One thing is certain: if tariffs return with a vengeance, the fallout won’t be limited to factory towns and farm fields. Wall Street could feel the squeeze too—and this time, the damage could run deep.