[Short Note] The Tariff Cheat Sheet

Massaging the tariffs: a market-clearing event & what is to come

Over the last few weeks, we have been diligently covering the evolving tariff situation over a mix of Twitter and Telegram. We have held the staunch view around 2 specific themes:

a) The Trump administration is playing a game of cat-and-mouse, and are not incompetent when it comes to understanding the game theory underpinning how world economies react to the “heavy hand”

b) That April 2nd AKA “Liberation Day”, or perhaps the lead-up into April 2nd, will be a market-clearing event. We will define what this means throughout this post.

Let’s clarify the timing of this post (an hour within the supposed Trump announcement). This is not meant to be predictive, rather a cross between a post-mortem and a synthesis of how we have arrived here. The hard work has already been done. The idea was to get constructive around the lower-end of BTC’s 80-90K band, in building conviction in area few thought had significant edge relative to the unclear macro picture.

Firstly, is PA to-date the work of the “Fed Put”, as some would call it? My answer is no. That is both a good and bad thing. Good - as the Fed still has the ability to inject liquidity through QE and QE-like mechanisms. Bad - as the Fed is currently paralyzed through the tariff front-running / whipsaw that is (currently) being proposed as transitory, per the most recent FOMC. The implications therefore are unanchored: data prints may be / have been at the tails of the spectrum (and are noisy). Seasonal patterns may be distorted. This partially helps create the “interesting spot”, as one author has put it.

For now, the Fed have opened the doors to being more accommodating, having taken the words “restrictive” out of guidance, and convening toward projecting a dovish monetary stance - mirroring the post-pandemic response. At face value, they are valuing data around a) growth and b) the labor market over inflationary pressure. This suggests inflation has been defeated. That is not clear to me. We will convey our “feel” in the midterm - not our strength historically, especially around executing a view around - in a separate note. The above picture suffices for now: namely, that stagflation is perhaps an unaddressed topic of concern, but not the bus driver when it comes to near-term pricing.