Einhorn Warns Trump's Tariffs Will Force Fed Rate Cuts, Market Volatility Rises

Veteran equity manager David Einhorn has raised concerns that President Trump's tariff policies could lead to more Federal Reserve rate cuts in 2025, labeling the tariffs a 'regressive tax' that disproportionately affects lower-income consumers. Barclays analysts echoed these sentiments, stating that while a recent pause on tariff increases provided a temporary market floor, the uncertainty surrounding Trump's governance could limit future gains. The market has already reacted sharply to Trump's erratic tariff announcements, including a significant drop in shares of companies like Stanley Black & Decker, which also saw a brief recovery following Trump's temporary tariff reduction. Analysts have noted that Trump's policies are likely inflationary, which could contribute to rising bond yields and potential economic downturns. This volatility has led to what some are calling a 'Trump put,' a term used to describe interventions aimed at stabilizing the market. Overall, while short-term market rebounds have occurred, the long-term outlook remains clouded by uncertainty about trade policies and their economic implications.