Finance

Trump pivot on tariffs shows Wall Street still has a seat at his table

Published

2 months ago

April 10, 2025

Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on Dec. 6, 2023.

Tom Williams | Cq-roll Call, Inc. | Getty Images

With each passing day since President Donald Trump‘s sweeping tariff announcement last week, a growing sense of unease had begun to pervade Wall Street.

As stocks plunged and even the safe haven of U.S. Treasurys were selling off, investors, executives and analysts started to fret that a core assumption from the first Trump presidency may no longer apply.

Amid the market carnage, the world’s most powerful person showed that he had a greater tolerance for inflicting pain on investors than anyone had anticipated. Time after time, he and his deputies denied that the administration would back off from the highest American tariff regime in a century, sometimes inferring that Wall Street would have to suffer so that Main Street could thrive.

“It goes without saying that last week’s price action was shocking to see as the market has begun to rewrite completely its sense for what a second Trump presidency means for the economy,” said R. Scott Siefers, a Piper Sandler analyst, earlier this week.

So it came as a huge relief to investors when, minutes after 1 p.m. ET on Wednesday, Trump relented by rolling back the highest tariffs on most countries except China, sparking the biggest one-day stock rally for the S&P 500 since the depths of the 2008 financial crisis.

Despite a presidency in which Trump has tested the limits of executive power — bulldozing federal agencies and laying off thousands of government employees, for example — the episode shows that the market, and by proxy Wall Street statesmen like JPMorgan Chase CEO Jamie Dimon who can explain its gyrations, are still guardrails on the administration.

Later Wednesday afternoon, Trump told reporters that he pivoted after seeing how markets were reacting — getting “yippy,” in his words — and took to heart Dimon’s warning in a morning TV appearance that the policy was pushing the U.S. economy into recession.

Dimon’s appearance in a Fox news interview was planned more than a month ago and wasn’t a last-minute decision meant to sway the president, according to a person with knowledge of the JPMorgan CEO’s schedule.

Bond vigilantes

Of particular concern to Trump and his advisors was the fear that his tariff policy could incite a global financial crisis after yields on U.S. government bonds jumped, according to the New York Times, which cited people with knowledge of the president’s thinking.

“The stock market, bond market and capital markets are, to a degree, a governor on the actions that are taken,” said Mike Mayo, the Wells Fargo bank analyst. “You were hearing about parts of the bond market that were under stress, trades that were blowing up. You push so hard, but you don’t want it to break.”

Typically, investors turn to Treasurys in times of uncertainty, but the sell-off indicated that institutional or sovereign players were dumping holdings, leading to higher borrowing costs for the government, businesses and consumers. That could’ve forced the Federal Reserve to intervene, as it has in previous crises, by slashing rates or acting as buyer of last resort for government bonds.

Ed Yardeni on tariff pause: This is a positive development for the economy

“The bond market was anticipating a real crisis,” Ed Yardeni, the veteran markets analyst, told CNBC’s Scott Wapner on Wednesday.

Yardeni said it was the “bond vigilantes” that got Trump’s attention; the term refers to the idea that investors can act as a type of enforcer on government behavior viewed as making it less likely they’ll get repaid.

Amid the market churn, Wall Street executives had reportedly worried that they didn’t have the influence they did under the first Trump administration, when ex-Goldman partners including Steven Mnuchin and Gary Cohn could be relied upon.

But this last week also showed investors that, in his mission to remake the global order of the past century, Trump is willing to take his adversarial approach with trading partners and the larger economy to the knife’s edge, which only invites more volatility.

‘Chaos discount’

Banks, closely watched for the central role they play in lending to corporations and consumers, entered the year with great enthusiasm after Trump’s election.

The setup was as promising as it had been in decades, according to Mayo and other analysts: A strengthening economy would help boost loan demand, while lower interest rates, deregulation and the return of deals activity including mergers and IPO listings would only add fuel to the fire.

Instead, by the last weekend, bank stocks were in a bear market, having given up all their gains since the election, on fears that Trump was steering the economy to recession. Amid the tumult, it’s likely that reports will show that deal-making slowed as corporate leaders adopt a wait-and-see attitude.

“The chaos discount, we call it,” said Brian Foran, an analyst at Truist bank.

Foran and other analysts said the Trump factor made it difficult to forecast whether the economy was heading for recession, which banks would be winners and losers in a trade war and, therefore, how much they should be worth.

Investors will next focus on JPMorgan, which kicks off the first-quarter earnings season on Friday. They will likely press Dimon and other CEOs about the health of the economy and how consumers and businesses are faring during tariff negotiations.

Wednesday’s reprieve could prove short lived. The day after Trump’s announcement and the historic rally, markets continued to decline. There remains a trade dispute between the world’s two largest economies, each with their own needs and vulnerabilities, and an unclear path to compromise. And universal tariffs of 10% are still in effect.

“We got close, and that’s a very uncomfortable place to be,” Mohamed El-Erian, chief economic advisor of Allianz, the Munich-based asset manager, said Wednesday on CNBC, referring to a crisis in which the Fed would need to step in.

“We don’t want to get there again,” he said. “The more you get to that point repeatedly, the higher the risk that you’re going to cross it.”

The Fed got very close to having to intervene due to market malfunction, says Allianz's Mohamed El-Erian

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

20 hours ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

22 hours ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”