President Trump's "flood the zone" strategy behind his flurry of executive actions could cause whiplash for CEOs who are trying to get a hold on where the economy is headed during his second term.
Central to Trump's belief in how America regains whatever strength he thinks it has lost on the global stage is levying "fair and reciprocal" tariffs on all U.S. trade partners to bolster domestic manufacturing, which includes not just adversaries such as China, but also allies like Mexico and Canada.
The tariffs on Mexico and Canada are likely to hit American car manufacturers like Ford (F) and General Motors (GM) hardest since they treat North America as one region, selling millions of cars to Mexico and Canada.
"If they're protracted, [tariffs] would have a huge impact on our industry with billions of dollars of industry profits wiped out," Ford CEO Jim Farley said on the company's Q4 earnings call.
China takes aim at Big Tech
One issue Trump faces by flooding the zone with policy actions is that his administration is struggling to keep up with enacting his tariffs, as the Wall Street Journal reported.
In fact, his 10% tariff on China is the only one currently in place. Trump has said that an additional 10% tariff will be levied on China and 25% on Canada and Mexico on March 4.
Beijing, of course, has always been the primary target of his trade policies, as he pledged to slap up to 60% tariffs on the country during his presidential campaign last year.
While Nvidia CEO Jensen Huang said in the company's recent earnings call that Trump's trade war is hurting the company's revenue, he added that the impact of the administration's tariff strategy is "unknown" because there is a lot that remains unclear about how far Trump will take it.
The Wall Street Journal reports that China could be planning to target American tech companies with antitrust probes and other actions as retaliation, including Nvidia (NVDA), Apple (AAPL), Google (GOOG), Broadcom (AVGO) and Synopsys (SNPS), which is awaiting Beijing's approval on a proposed $35 billion acquisition.
Given the market cap of these companies, any retaliatory steps taken against them would likely drag down the tech-heavy indexes of Nasdaq and the S&P 500.
Some of the impact of Trump's tariffs could be felt indirectly. For instance, as Trump seeks to end the "de minimis" exemption, which allows shipments valued at less than $800 to enter the U.S. free of tariffs, this would hurt Chinese retail manufacturers like Shein and Temu.
"Depending on how Temu and Shein decide to respond to the elimination of the de minimis exemption, we could see their ad spend on Meta being curtailed, in our view," Youssef Squali of Truist Securities wrote in a note. "The same could hold for Google."
Stock market could force Trump's hand
One interesting factor for investors to monitor and that might help ease some short-term anxiety is that if one looks back on Trump's first term in office, he tends to obsess over the performance of the stock market.
"What we know is that Trump clearly follows the stock market and uses it as a real-time gauge that markets are approving and endorsing his policies," said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, as reported by MarketWatch.
In other words, if the stock market begins to plunge because of his trade policies, Trump could be forced to pull back and ease some of his tariffs.
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