Investors Warn of Market Complacency Amid Trump Tariff Threats

Investors and senior bankers have expressed concerns that the current highs in US stocks may be giving companies a false sense of security, leading them to overlook the economic threats posed by the impending tariffs from the Trump administration. Some investors and bankers, including executives from major financial institutions, have noted signs of complacency in the market. They argue that traders are overly optimistic, betting that the US president will scale back from destabilizing economic policies, a confidence they believe is misplaced.

Jamie Dimon, an executive at JPMorgan Chase, commented on the market's complacency, stating, "Unfortunately, I think there is complacency in the market." Vincent Mortier, the chief investment officer of Europe’s biggest asset manager, echoed this sentiment, warning of a growing confidence in the Taco narrative (Trump Always Chickens Out).

A former top Trump official shared a similar view, noting that markets are now confident that Trump will abandon his tariff policies. However, he added that he doesn’t believe Trump will back down, stating, “Trump has always liked tariffs.”

The S&P 500 share index has climbed 30% since April, recovering from earlier lows brought on by Trump’s proposed reciprocal tariffs. The stock rally picked up after he paused the tariff policies, lowering levies on countries to the baseline 10%.

This week, Trump disclosed that his administration is considering additional tariffs on multiple countries. He sent letters to at least 20 countries, including its trading allies Japan, Canada, and Brazil, informing them of possible new tariffs, unless they discuss and agree on trade deals. If Trump follows through on his threat, Brazil could easily see a 50% levy.

Despite the markets’ stance, the US president has held firm on his plan to enforce steep “reciprocal” tariffs starting August 1, warning that no extension will be granted without trade agreements. So far, only the UK, China, and Vietnam have struck deals with the US.

Research teams at several banks expect Trump to ease his most aggressive tariffs in order to avoid further market disruption. This outlook has largely helped maintain stability in stock and bond markets while lowering borrowing costs for companies.

Some bankers and investors, however, are concerned that the President may stick to his proposed levies. Robert Tipp, head of global bonds at PGIM, asserted that the Taco narrative may fail in such an unpredictable environment. He added, “The tariffs that have ended up sticking are somewhat high. And yet markets have cruised on. Will there be a day of reckoning?”

Some have also argued that tariffs are not the only issue investors should be wary of. The Big Beautiful Bill that was recently signed into law has analysts worried about ballooning national debt. Some economists forecast the legislation could contribute trillions of dollars to the federal debt.

A senior executive at a leading US bank argued that the Trump administration’s policies and tax legislation have eroded confidence in the US as a stable and dependable store of value. According to the executive, investors are reevaluating their exposure to US assets more seriously than ever before, with many privately conceding that the country’s traditional “risk-free premium” has faded.

He insisted that his biggest concern is the growing US deficit, warning that more taxes would eventually harm the dollar.

Another senior executive at a global lender agreed the US has lost its “safe haven” status. He argued that while the US is still a critical market, it’s become more expensive to do business in the country. He also raised concerns over the emerging political tensions, especially over the rule of law. In his opinion, the Trump administration’s attacks on law firms, the media, and universities have been detrimental to the country’s status.