So much for the ‘Trump put’

Nobody’s surprised anymore that financial markets are throwing such a fit over Donald Trump’s tariffs. If you think about it, this is the most natural, most rational response to the realisation that global trade is being forced back to the hyper protectionist madness of a century ago; whose endgame intensified the greatest depression on record.

What is surprising, however, is that it took markets this long to wake up to the reality of Donald Trump’s world view. The sharp downturn in US equities, triggered by sweeping tariffs and mounting investor anxiety, has now debunked—perhaps permanently—the myth of the so-called “Trump put”.

The term itself was always a stretch—an attempt by Wall Street to impose a familiar logic onto a figure who has never shown much regard for economic orthodoxy.

The “Trump put” was modelled on the well-known “Fed put,” which refers to the belief that the US Federal Reserve will intervene to prop up markets when needed, typically by cutting interest rates or injecting liquidity. Trump, according to this logic, would similarly never let the markets fall too far, if only because he views, or at least viewed, the stock market as a referendum on his leadership.

But this interpretation was willfully blind to what Trump has always made abundantly clear: his economic instincts are not driven by market efficiency or global integration, but by protectionism, bilateralism, and a deeply transactional, even greedy view of trade.

During both his 2016 and 2024 campaigns, Trump made no secret of his disdain for multilateral trade agreements, his suspicion of global supply chains, and his preference for tariffs as a tool of statecraft.

That his supporters on Wall Street clung to the idea of the Trump put says more about their own wishful thinking than it does about Trump himself. They saw the 2017 corporate tax cuts and early market rally as evidence of a business-friendly president, conveniently ignoring the fact that those gains came alongside aggressive deregulation that often undermined long-term stability and oversight. More crucially, they ignored the looming threat of trade wars that Trump practically guaranteed.

Now, with a 10pc baseline tariff slapped on all imports and reciprocal duties aimed at 90 trading partners, the illusion is shattered. The S&P 500 and Nasdaq have tumbled.

Investor confidence has weakened. Inflationary pressures are mounting again. And the same voices that once celebrated Trump’s “unconventional genius” are now fumbling for explanations.

What they’re learning, far too late, is that Trump’s view of economic nationalism is incompatible with the market orthodoxy that Wall Street prizes. In Trump’s world, supply chains are suspect, deficits are treasonous, and tariffs are a badge of honour.

The fact that these policies introduce volatility and erode investor trust is not a bug—it’s a feature. The longer-term impact on corporate earnings, cost structures, and global trade relations is only beginning to surface. US exporters now face retaliatory tariffs in key markets. Multinational supply chains are being restructured on the fly. Capital spending is slowing.

And yet, the irony runs deeper. Trump’s re-election came not in spite of these views, but because of them. He did not hide his disdain for free trade; he amplified it. He did not flirt with protectionism; he embraced it.

The idea that a second Trump administration would moderate its approach or adopt a more conventional economic playbook was always a fantasy. His base expected tariffs. And yet, bizarrely, many in the market expected the Trump put.

It is this disconnect that underscores the irrational exuberance that periodically grips financial markets. For all the tools at their disposal, investors can still fall prey to political wish-casting, mistaking campaign bombast for policy pragmatism. In the case of Trump, the signals were always loud and clear. He would govern as he campaigned—loudly, unconventionally, and with zero concern for the market’s delicate nerves.

What’s more, the faith in the Trump put also exposes a recurring flaw in market psychology: the assumption that any administration, regardless of ideology, will eventually pivot to placate Big Money.

In reality, Trump is less interested in Wall Street appeasement and more invested in cultivating his populist narrative—where elite institutions are the enemy and economic pain is merely the price of reclaiming American sovereignty.

And it’s not just equity investors who’ve been burned. The broader investment landscape is now discovering that the tremors go far beyond stock valuations. Safe-haven assets—long considered immune to political upheaval—have faltered just when they’re needed most.

A recent Bloomberg report documenting how gold, Treasury bonds, and even the dollar have failed to provide shelter in this storm points to a deeper problem: that the volatility induced by Trump’s policies is turning out to be more corrosive than previously feared. The disintegration of both the Trump put and traditional havens in tandem leaves investors with little recourse and fewer assumptions to lean on.

Integrating these insights adds another layer to the unraveling myth. The destabilisation caused by Trump’s protectionist stance is not confined to risk assets; it now infects instruments once thought to be reliable ballast.

This underscores just how deeply policy choices, especially when erratic and confrontational, can unsettle the global financial system. It also suggests that volatility under Trump is systemic, not episodic. If there’s no Fed put, no Trump put, and not even a reliable Treasury bid to anchor portfolios, what’s left?

The answer is uncertainty. And markets, as we know, price that with a vengeance.

So now, the question is: what next? For investors, it means recalibrating expectations. The Trump put is dead. If anything, the new era will be defined more by economic brinkmanship than by backstops. The administration has shown no sign of reversing course, and Trump himself continues to frame market corrections as necessary sacrifices in the battle for “fair trade.”

For policymakers and economists, the lesson is simpler: markets are not always rational, and investor sentiment can be driven as much by political delusion as by hard data.

The long-standing assumption that leaders will ultimately bow to market logic has been upended. Nowhere is this clearer than in the reactions to Trump’s latest tariffs, which have drawn condemnation not only from US trading partners but from domestic industries as well.

In that sense, the unraveling of the Trump put is not just a market correction. It’s a reality check—a reminder that politics is not always subservient to capital, and that sometimes, the market gets it spectacularly wrong.

Whether or not the market recovers in the short term, one thing is certain: the next time investors assume political figures will prioritise their portfolios, they might want to revisit the Trump chapter.

They might find it’s not the safety net they imagined, but the trapdoor they ignored.

Copyright Business Recorder, 2025