Tariffs Expose Wall Street's Misplaced Faith in Trump

Bankers and business leaders imagine a more reliable, less protectionist version of the president than the one that actually exists. Now they're finding out the hard way.

Most reports of Trump’s recently announced tariffs describe them as exceeding expectations, citing JPMorgan, Capital Economics, and other analysts. Stock markets were cautiously optimistic too, rising for three consecutive days leading up to Trump’s announcement. After hearing the news, they crashed.

This collective miss is more than just guessing low. It derives from a larger analytical failure in the financial industry and much of the business community: a refusal to see Donald Trump as he is. Instead, they assume an imaginary version of him, a Trump they can support—more strategic, less impulsive, someone who thinks like them.

To believe that in 2024, bankers and business leaders have to dismiss a lot of what Trump says as a show for the masses, not an expression of intent. Tariffs were one of the only clear policy planks of his 2024 campaign, building on years of public advocacy. He imposed tariffs in his first term, including on Canada and the European Union, abusing the same emergency powers he is now. Those tariffs weren’t as large or as widespread, but as many warned, Trump Term II isn’t contained by “adults in the room,” such as Goldman Sachs alum and first term Treasury Secretary Steve Mnuchin.

Despite living through the volatile Trump presidency—which got rich bankers tax cuts for income and capital gains but ended with mismanagement of COVID—then seeing him lie about losing the 2020 election, commit crimes, get indicted, and run against rule of law, many financial leaders supported Trump in 2024 and expected good things from his win.

JPMorgan CEO Jamie Dimon said bankers were “dancing in the street” after the election, because Trump would cut regulations and “make government more efficient.” Bank of America CEO Brian Moynihan put it similarly: “the election results provided lift to sentiment for a more pro-business climate.”

Beyond projecting economic stability from electing convicted felon Donald Trump under the assumption he’s secretly different from the unstable, corrupt character he plays on TV, there were feelings of victimization.

“Some Wall Streeters,” the Financial Times wrote a week before Trump took office, “feel able to embrace making money openly.” The article quotes a “top banker” who is excited that, “Most of us don’t have to kiss ass because, like Trump, we love America and capitalism.”

“I feel liberated,” said another. “We can say ‘retard’ and ‘pussy’ without the fear of getting cancelled. It’s a new dawn.”

Whether bankers assumed Trump wouldn’t do what he said he would, or overlooked economic considerations in culture war excitement, his actions in office have had an unignorable negative impact. Empowering Elon Musk and “DOGE” to illegally mass-fire government employees creates regulatory uncertainty, and puts a bunch of people out of work. Threatening allies such as Canada and Denmark disrupts the international order, and defying domestic courts makes America a riskier place to do business. Tariffs raise prices, risking stagflation, and the most recent ones are so large and sweeping that they’ll severely hamper trade.

That bankers and business elites bought into Imaginary Reliable Trump for so long—and some still cling to it, even now— is reminiscent of another dumb, ultimately disastrous Wall St. groupthink: the 2000s housing bubble and subsequent financial crisis. The industry operated under the belief that new financial instruments such as mortgage-backed securities, collaterized debt obligations, and credit-default swaps created so many hedges that they’d defeated risk. In reality, the banks built a massive securities bubble on top of shaky foundations, essentially betting everything on housing prices continuing to rise. When the housing bubble burst, it took the system with it.

Then as now, their belief in their own superior savviness—along with social pressure against challenging the prevailing sentiment as long as there are short-term profits—led to a catastrophic error. But if anything, the current one is worse.

The housing bubble error was excessive faith in their own abilities. With Trump, they put their faith in a conman.

Donald Trump has never been good at business. He’s good at image creation, and to the extent he made money, his business model is fraud.

He defrauded contractors, refusing to pay vendors after they had already delivered, forcing them to take him to court, accumulate legal fees, and settle for less. He defrauded business partners, loading up companies with debt while paying himself a large salary, then having the money-losing company declare bankruptcy, wiping out other investors while he kept what the company paid him. He and his family defrauded real estate investors with the help of a Panamanian fraudster, lying that a majority of units in a development were already sold—thereby making the rest seem like a safe investment—when few actually were.

He defrauded customers using fake businesses such as Trump University, settling lawsuits with victims for $25 million. He defrauded banks to get himself bigger loans on more favorable terms, and faced a $364 million penalty from a civil fraud case in New York.

In 2022, a jury found Trump businesses guilty of 17 counts of criminal tax fraud and falsifying business records. In 2024, a different jury found Trump personally guilty of 34 felony counts for falsifying different business records in a scheme to cover up violations of election laws and hide information from 2016 voters.

Even his most successful venture, The Apprentice, was essentially fraud. It wasn’t criminal, because there’s no law saying “reality TV” has to be realistic, but producers heavily edited Trump footage to make him seem like a business genius despite seeing him repeatedly demonstrate otherwise. As a member of the production team put it, “Our job then was to reverse-engineer the show and to make him not look like a complete moron.”

Wall St. elites played that role in Trump’s first term, such as Goldman Sachs COO Gary Cohn as chair of the National Economic Council. But in the second term, it’s all enablers.

The morning after Trump’s “Liberation Day” tariff announcement, with stock markets dropping, Commerce Secretary Howard Lutnick summed up the White House’s entire argument: “Let Donald Trump run the global economy. He knows what he's doing. He's been talking about it for 35 years. You gotta trust Donald Trump in the White House.”

Lutnick’s empty reassurances didn’t appear to work, as the S&P, DOW, and NASDAQ had their worst day since COVID five years ago, then dropped further rather than bounce back.

Wishful thinking and cult-of-personality cheerleading have their limits. The market is ultimately more powerful than any national leader. Other countries have a say too. Eventually, economic reality will win out.

Trump could reverse course and reduce tariffs, as he has before. He could keep the tariffs and use them as opportunities for corruption, exchanging exemptions for various favors. Or, considering how much he’s committed to these tariffs already, and how Congress has demonstrated little resistance, he could push ahead. The only safe bet is that the future will be volatile, with White House incompetence and lawbreaking. America’s position as a widely trusted bedrock of the global economy is gone.

But if things fall apart, there won’t be bailouts this time, with the U.S. government a stabilizing lender of last resort. Because the U.S. president is the cause of the problems.