The 180 Degree Theory - Trump’s Tariffs Will Deflationary – Top 3 Takeaways – April 7th, 2025 Driven By Braman Motorcars
Takeaway #1: The tariffs won’t play out the way you think
I’m a big believer in the 180-degree theory... Which in my life has proven to be 180-degree fact. I’ll start with a few specific examples about decisions I’ve made that have proved to be some of the best decisions in my life. At the age of 18 in the 90’s - starting a healthy fast-food company on the east coast. An idea that was rejected by the first two investment banks (and the SBA that I presented it to). Around the same time dropping out of a college as a dean’s list student on an academic scholarship to pursue a radio career. Ditching a TV internship to pursue a radio internship. Aggressively buying stocks and real estate during the peak of the Great Recession. Choosing to continue my radio career from the Palm Beaches rather than relocating to major markets across the country. Buying additional real estate right around the time the pandemic hit. To be sure I’ve made some mistakes too. Most notably a failed first marriage that led to significant financial fallout when I made a series of bad decisions with who I could trust – leading to a business bankruptcy of my real-estate company. Hence my first rule of money about never letting your money and emotions cross paths. I know how bad it can be when you combine those two things. But the bottom line is this and it’s my message to you to start the week. As much as some of my biggest calls and biggest decisions have happened through the application of the 180-degree theory at various flashpoints in modern American history, the decision to do so is remarkably easy. I’ll explain. Are you a believer in this country? Do you believe that this country will be better off by the time President Trump’s done with his presidency than it is today? If the answer to those two questions is yes – the rest is particularly easy to digest. Here’s a fact. Every major stock market selloff in American history has proven to be a historically good time to invest in American companies. Fear and human nature always have people thinking that maybe “this time” will turn out differently. At a certain level that’s an absolute possibility. Every world superpower has eventually fallen. But unless you believe that this is that time, that truly the American dream is dead and that our country’s best days have come and gone – there's no doubt that what’s happening in the financial markets is presenting excellent opportunities. Again, American history is 100% on this. Once again perspective in the mist of fear is key. So, about the tariffs not working out the way you might think, I’ll explain.
Takeaway #2: Tariffs will prove to be deflationary
First and foremost, nothing you’re buying today within the United States is impacted by any of last week’s tariffs announcements. In today’s Q&A I speak to a couple of key points. First, that President Trump’s reciprocal tariffs don’t actually take effect until Wednesday of this week and that even his automotive tariffs won’t impact you for quite some time because your average manufacture has over three months of inventory. But that’s not why tariffs will prove to be deflationary. It is true that once tariffs hit prices on many things are likely to jump a bit (though by likely an average of 5%-8% at the high end). With affordability challenges following ‘Bidenflation bringing about historically high inflation – the prospect of rising prices is the last thing that most Americans want to hear. But I assure you this will be net deflationary and here’s why. What’s the biggest expense for almost all Americans? Housing, right? What’s the second biggest expense for almost all Americans? Transportation of course. What’s the second biggest determining factor in costs for most Americans for those two things? The cost of financing. Do you know what the average 30 year-fixed rate for a mortgage was the day that Donald Trump was sworn in as President of the United States? 7%. Do you know what it is entering this week? 6.6%. It doesn’t sound like much until you consider that on the average home financed in this country – that equals savings of $34,000 over the term of the loan at a savings of $93 dollars per month. And that’s just the beginning. More on that point in a moment. Do you know what the price was for a barrel of oil at the day that President Trump was inaugurated as president of the United States? $78. Do you know what it is today? $59. That’s a savings of greater than 20% that will be passed onto at the pump. These are just two quick examples of how Trump’s policies, and the market reaction to them, in two of the biggest cost areas of our life immediately began to be deflationary – in expectation that we may have a recession. So, about that.
Takeaway #3: It’s just the beginning
JP Morgan now thinks there’s a 60% chance of recession. As economic growth slows down (assuming it does – which isn’t entirely a given), the Federal Reserve will rapidly decrease interest rates. On Friday, Federal Reserve Chairman Jerome Powell said it’s too early to react with an emergency change in interest rate policy – however market expectations have changed from an expectation of two interest rate cuts late in the year – to a minimum of four cuts with a near 100% chance that interest rates will be cut starting next month – in May. Having meaningfully lower interest rates quicker will act to significantly make housing more affordable, financing a vehicle far more affordable and it’s likely to make all forms of debt down to credit card debt more affordable as well. What’s more, if consumers do take a more cautious approach to spending, retailers and manufacturers will have to get back to discounting the cost of goods to spur sales – which could mean that even items not subject to tariffs today – could prove to be lower cost to consumers a few months from today. There are a lot of ifs in there but based on the price action we’ve seen the net effect of the roiling and resetting in the financial markets to Trump’s tariffs policies – has already been deflationary. And it’s just the beginning. The 180-degree theory, or perhaps fact as it’s historically has proven to be, is just beginning. What’s happening right now presents opportunity for those who’re focused on long term goals.