Weekly thoughts #25
The Art of the Deal.
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Unless you are an alien and just landed on the Earth, I am assuming you know that the stock markets have been falling strongly in recent days. For example, the S&P 500 has fallen around 8% in just over five days. What's the reason for this?: The Trump Administration's new tariff policy. Below, I will explain what it consists of, how it is affecting stock prices, and what my perspective is on the current situation.
Trump has implemented a broad tariff strategy, escalating protectionist trade policies. On April 2, 2025, dubbed “Liberation Day,” he issued an executive order imposing a minimum 10% tariff on all U.S. imports, with limited exceptions:
“Some goods will not be subject to the Reciprocal Tariff. These include: (1) articles subject to 50 USC 1702(b); (2) steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs; (3) copper, pharmaceuticals, semiconductors, and lumber articles; (4) all articles that may become subject to future Section 232 tariffs; (5) bullion; and (6) energy and other certain minerals that are not available in the United States”. [The White House].
Initially, tariffs were reciprocal in nature.
“These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated”. [The White House].
However, 57 nations face higher “reciprocal tariffs” ranging from 11% to 50%. ( 54% on Chinese goods, 20% on European Union imports, and up to 46% on Vietnamese products among others.
What, in principle (reciprocal tariffs) was well received by the markets, has turned into the opposite when tariffs have been placed above for some countries.
In summary, the market participants are concerned with tariff levels set in excess of a corresponding country’s levels.
The Art of the Deal
![Apprentice: Complete First Season/ [Reino Unido] [DVD]: Amazon.es: Películas y TV](https://substackcdn.com/image/fetch/$s_!xdO-!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F8876c50a-d562-4308-a100-08d8310ff447_193x261.jpeg "Apprentice: Complete First Season/ [Reino Unido] [DVD]: Amazon.es: Películas y TV")
We could say that President Trump's negotiating style is aggressive, with maximum proposals playing a very important role. To explain this, we could refer to an excerpt from the book “Think Big,” a bestseller that recounts anecdotes and excerpts from Trump's business dealings. Donald Trump was the absolute star of “The Apprentice,” an NBC television show featuring a group of businessmen competing for a $250,000 prize and a contract to manage one of Donald Trump's companies.
The show was a huge success, and NBC approached Trump to renew for three more years. Trump agreed and proposed earning the same amount as the lead actors on the famous series Friends, $2 million per show. NBC people said, “We can do that. $2 million per show.” To which Trump replied, “No, no, you don't understand. There are six of them and there's only one of me; I want $12 million a show.” The agreement was later signed for much less than that amount, but this gives us an idea of the concept of a deal that the current President of the United States has.
Anything can happen. But in my opinion, Trump's tariff policy is a maximal bet that seeks to balance the situation and achieve long-term advantages. This leaves us with stocks trading at the cheapest valuations we've seen since Covid. If the President makes continued progress on tariff deals, uncertainty will be reduced, and the market will begin to recover. It's difficult to predict, but we could be facing a good opportunity to expand portfolio positions and buy very high-quality businesses at much more reasonable valuation multiples.
No one knows the future direction of the negotiations and the effectiveness of the new measures. But, in my opinion, Trump is not an “animal” characterized by inaction. Rather, he knows how to go to the most favorable side by pulling hard on the rope without breaking it. We'll see.
As you already know, April will have two posts (March and April posts). I apologize for this, but I will give you a sneak peek at some key points about the first company I am analyzing:
European beverage business with a century background.
Unique assets in the form of market-dominant brands.
Secular revenues.
Cash generator and high return on capital.
High dividend.
Please note that there will be no “Weekly Thoughts” on Holy Monday and the day after Easter Sunday due to religious reasons. Therefore, the next publication will be on April 28. The investment theses will be published on Wednesday of that same week.
I wish you a fruitful Holy Week.
Eloy.
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