Tariffs, Tactics, and Tacos

“President Trump always backs down! That’s why the markets keep rising.”
That’s the line currently being pinned on investors. And, of course, Wall Street has already coined the perfect nickname: Taco – short for Trump Always Chickens Out.

Last week, a journalist asked me whether the markets are too complacent right now. Whether we should brace for new shocks, like in April when prices suddenly plunged.

Questions upon questions, none of which have definitive answers. One can speculate, of course: Trump won’t reverse all of his measures. Tariffs will stay – but their exact level is up for heated negotiation.

Rather than joining in the tariff guessing game, we prefer to focus on those directly affected: the companies.

A real stress test for business models

And they’re anything but passive. Supply chains are being widened, prices adjusted. In the current earnings season, the most common reactions include: lowering guidance, issuing profit warnings, preparing analysts for shrinking margins or simply offering no guidance at all.

For many business models, this is a genuine stress test.
Those with pricing power? They just tack on another line for tariffs in the invoice. Customers grumble, but pay. Others started gradually increasing prices back when the first tariff talks began and can now absorb the added cost with ease.

That’s not always possible in a competitive world. The opposite happens, too: prices are cut.
Japanese carmakers are leading the way, slashing prices to defend market share. Isn’t that exactly what President Trump wants?

Our focus is on company-specific fundamentals. We know the business models, we analyze the quality of products, services, and management teams. And what we’re seeing so far gives us reason to be optimistic: this is manageable.
That’s how the market sees it for now, too.