Why Trump’s tariffs fail to ‘Bend it like Beckham’

Diversification across regions and megatrends — including clean energy transition, wealth transfer and AI — remains critical for wealthy investors during uncertain times.

Since president Donald Trump’s April 2 announcement of new tariffs, markets have oscillated in tandem with his shifting rhetoric — on China, Federal Reserve Chair Jerome Powell, and the tariffs themselves. An outsized figure in American politics, he constantly attempts to “Bend it like Beckham”, a film referencing another TV celebrity with a major global brand. But his moves often result in own goals.

Even Fox News, Mr Trump’s informal communications channel, recently noted markets tend to perform better in the absence of his posts on X. The volatility speaks volumes. Investor sentiment has quickly turned from FOMO (fear of missing out) to FOSI (fear of staying in). The VIX — Wall Street’s “fear gauge” — soared from 15 to nearly 60 in days, before moderating somewhat.

Does Mr Trump have the ability to develop a long-term strategy, like Sir Alex Ferguson, David Beckham’s mentor and one of the world’s most successful football managers? Or is he creating uncertainty by constantly switching tactics?

The answer may lie somewhere in between. Since 2016, the US has seen growing divergence in perception about everything American. Supporters argue he is correcting decades of trade imbalances, especially given the US typically imposes tariffs of just 2–3 per cent, while nations like China, India and the EU impose considerably more.

Historical context

Manufacturing in the heartland, they contend, must be rejuvenated. For critics, however, his actions risk long-term damage to US financial markets, diplomatic relationships, global leadership and soft power.

The scale of the market’s reaction warrants historical context. Sharp sell-offs like this have occurred only twice in recent decades: during the 2008 global financial crisis and the Covid-19 shock of 2020.

The latter, a Black Swan event, saw the S&P 500 bottom at 2,191 on March 23 2020, before rebounding sharply thanks to swift policy responses. By contrast, the current crisis resembles the GFC — a “known unknown”. In 2008, many seasoned analysts underestimated systemic ripple effects, even as warning signs emerged. It was the hedge fund manager John Paulson who stood apart, foreseeing the collapse triggered by sub-prime mortgages. I was working with a major fund of hedge funds in New York at the time, and the prevailing consensus was reassuring. Credit agencies were assigning AAA ratings to toxic assets — which sold with astonishing ease. Greed almost caused the collapse of the global financial system.

This current reversal is not market-driven but political. The post-1948 global order, built painstakingly since the Marshall Plan, is under strain. Tariffs are being imposed with renewed vigour, even on remote economies better known for penguins than manufacturing.

Wall Street shuffle

Wall Street is actively debating whether US exceptionalism is at risk. That this question is even being asked underscores the psychological and financial damage inflicted by the tariff shocks. US Treasuries, long seen as a haven, are yielding around 4.5 per cent — hardly a sign of calm. Yet long-term, the US remains the world’s most liquid and innovative market, albeit at premium valuations.

Although the institutions are now modelling divergent outcomes, the consensus leans toward stagflation risks, with bond vigilantes keeping yields elevated. Market watchers expect this pressure may ultimately force Mr Trump into compromise on tariffs, listening more to markets — represented by Treasury secretary Scott Bessent — than to uncompromising presidential economic adviser Peter Navarro.

Wall Street’s public critique of Mr Trump’s approach remains muted, though concerns are palpable, especially as Project 2025 and its hardline vision gain traction. Even veteran CEOs and analysts are treading carefully in their commentary, publicly offering cautious optimism when markets take a dive. Firms run the risks of not always acting in their clients’ best interest.

Tariff tickers

This is not the final act, but the opening chapter of a more turbulent era. Volatility is here to stay. One suggestion: a real-time “Tariff Ticker” to track market reactions to Trump’s posts and international responses.

In uncertain markets, fundamentals are paramount. Once again, firms and their advisers are correctly advising clients to remain calm. Emotional exits seldom work. As John Bogle, founder of the Vanguard asset management group, said: “Time is your friend, impulse is your enemy.” Diversification across megatrends — including AI, energy transition and wealth transfer — as well as across regions like Europe, Asia and the Middle East, remains critical. Asset class diversification always matters.

The focus is on returning to quality and liquidity. Cash and short-term US Treasuries yielding more than 4 per cent remain attractive. In equities, dividend payers and resilient growth strategies — whether via ETFs or active funds — are being favoured. A modest allocation to alternatives, including gold, adds ballast.

For those willing to trade at the margins, strategic use of ‘put’ options on sector ETFs or quality names provides an interesting investment choice. Regular investment plans in volatile markets are also a proven strategy over the long-term. As Warren Buffett reminded shareholders in 2017, quoting Rudyard Kipling: “If you can keep your head when all about you are losing theirs... Yours is the Earth and everything that’s in it.”

The best option for clients is to focus on what they can control: their emotions, their objectives and their long-term vision for themselves and their families.

Mr Trump, on the other hand, can take another leaf from the book of David Beckham, whose sporting achievements were admired in the US, Europe and Asia: sometimes it’s good to keep your own counsel and be judged by your actions rather than your words.

Malik S Sarwar, senior partner, Global Leader Group, USA