How markets find order amid Washington’s turbulence
17 JUL, 2025
By Alexis Bienvenu
Chaos reigns in Washington, where announcements of import tariffs fly in all directions, often unpredictably. In the latest salvo, Brazilian products have been hit with a 50% levy starting 1 August—despite the fact that the United States maintains a trade surplus with the country! If there were any lingering doubts, this confirms that economic logic holds little weight in the decisions being made in Washington.
Yet the market remains unflinching in the face of the spectacle. In the month leading up to 10 July, US equities have risen by more than 4%, emerging market stocks have posted more modest gains, and European stock markets remain stable.
The first explanation is that the market no longer believes the tariff announcements. Having learned from the surreal April episode of "reciprocal tariffs", when even the most forceful measures were either retracted the next day or postponed indefinitely, investors are now paying less attention to presidential announcements. Instead, they wait for economic logic to reassert itself at the last minute. As a result, the Brazilian stock market lost only a few percentage points following the surprise 50% tariff announcement and remains stable over the month. Meanwhile, the US copper market, also under threat of 50% tariffs, reflects only part of the added cost. Implicitly, market participants do not seem to expect full implementation of this tax.
Frankly, applying such a measure would be counterproductive, as it would hit consumption of imported copper in the US—vital in numerous sectors. Copper is not only indispensable for automobile manufacturing and electrical infrastructure, but also for building the data centres that underpin US economic growth. Therefore, this tax would drag down national productivity. Nevertheless, in Washington, the narrative of long-term industrial metals autonomyoverrides all else, even though it takes years—if not decades—to bring a mine into operation. Meanwhile, demand will only continue to rise, especially if construction slows, which further distances the illusion of autonomy.
Another explanation: the market knows its terrain and organises within this chaos, relying especially on corporate adaptability to reorganise supply chains or offset extra costs. Much like tornadoes are stable structures born from meteorological turbulence—provided they receive thermal energy and dissipate disorder (known as “entropy”)—today’s market emerges from Trumpian chaos, fuelled by the buying flows of Wall Street. A structure of this type, known as “dissipative”, can persist as long as it is energised. In this admittedly imperfect analogy, the market vortex could continue as long as investors and companies remain eager for equities, which they do as long as markets rise. Thus, from chaos arises order.
The downside to this phenomenon is that a bullish Wall Street no longer acts as a bulwark against the swerves of the Oval Office. In contrast, the market crash—particularly in fixed income—following the announcement of “reciprocal” tariffs, had contributed to a change in presidential tone, as he later granted negotiation periods and softened his stance. If the market no longer falls sharply when new tariffs are announced, what can restrain the US president?
International organisations hold no sway over him. US federal judges, who have attempted to intervene by invoking the law, have seen their powers curbed by the Supreme Court, itself largely controlled by the Republican leader. As for the US Federal Reserve, the last line of defence for markets, it remains rhetorically independent. However, not only does it lack any authority over tariff policy, but it is also under constant destabilising pressure from the White House, which has made no secret that the next Fed chair will echo the Trumpist line. No force, it seems, can contain the Trumpian hurricane.
None… except the economy itself. If the economy were to clearly deteriorate—as is likely given the rising tariffs—it could serve as a call to economic reason, though this process would necessarily be dramatic. Thus, one form of chaos would give birth to another—but perhaps a preferable one in the long term.
