President Donald Trumpof the U.S.'s closest allies this month by imposing steel and aluminum tariffs, leading Canada, Mexico and the EU to either impose their own counter-tariffs or announce plans to retaliate in kind. In addition, the U.S. Commerce Department is of at least $50 billion in tariffs on June 15.
Foreign relations aren't the only thing feeling the brunt of Mr. Trump's protectionist policy shift. Since March, his trade moves -- imposed or threatened -- have cut 4.5 percent from U.S. equity markets, JPMorgan's (JPM) Marko Kolanovic estimated in a note earlier this week.
"Taking the current market capitalization, this translates into $1.25 trillion of value destruction for US companies," Kolanovic wrote. The analysis tracks trade-related news flow and has a margin of error of plus or minus 1 percent. That total of value destruction equates to two-thirds of the total fiscal stimulus, including the tax cuts, launched under Mr. Trump's administration, Kolanovic estimated.
"It is a broad consensus across academia, business leaders and market practitioners that trade wars and protectionism are a lose-lose economic proposition," Kolanovic wrote.
A strategy that includes bluffing and threats "can be successful in a two-party negotiation setup, but is more likely to deliver self-defeating results in a complex system such as global trade," Kolanovic wrote. "Think of supply chain disruptions, the uncertainty it introduces in long-term planning, etc."
Reversing Mr. Trump's aggressive trade policies could spark about a 4 percent market rally, while fiscal policy choices, like the tax cuts, seem more permanent. But a policy change has to happen soon, Kolanovic wrote. Damage would become permanent, he wrote, if "this uncertainty hangs over the market for a more extended period of time."