Global markets plunge after Trump’s tariffs – one’s losses are the other’s gains

Stock market investments are always gambles. One investor wins, the other loses.

The global financial World has reacted rapidly to the changing conditions. The fearful try to get out of the gamble ahead. It is then a rapid correction.

Considering the huge losses in a short moment, the correction does reflect a big problem. How did the stock markets lately rise to historic highs?

The gains on stocks reflect the profitability of the underlying companies. If their profits fall or are expected to fall, their stock prices will fall as well.

Companies around the World were able to capitalize on substantial profits while the US had no or small import tariffs and their shares rose to historic highs. On the other side, the US had lost a great deal in their own industrial output, employment and revenues, with a monstruous negative trade balance and a historic indebtness. The World’s capital and profits grew while the US lost. The introduction of tariffs will reverse this imbalance in favor of the US. The companies from protected foreign markets will have no free access to the US.

The losses on the US stock markets can be explained by the global interconmection of US companies and the fear that other countries which already taxed US goods will increase their tariffs. The EU already taxed US goods with up to 30%, while the US now increased the tariff from 0-2% to 20%.

As Donald Trump explained on Sunday, and also the US Foreign Secretary Marco Rubio did, there will be a moment of adaption to the new tariffs. Medicine can taste sour but it helps.

Of course, the profeteers in the rest of the World will cry foul as their golden times of free and open entry to the US are over.

But as Elon Musk suggested to Europe: take down all tariffs between the US and Europe for a fair plain level playing field. Including Europe’s excess rules and regulations. This would create the greatest, most powerful market of the World.