Here is another interesting piece by the esteemed Howard Marks of Oaktree. His articles always make a lot of sense to me. His profound understanding of the economy and financial markets, coupled with his exceptional investment philosophy and approach, is remarkable to me.
In this particular article, it is evident that tariffs and the broader implications of protectionist policies are certainly on his mind. His voice remains essential in an ever-changing financial landscape.
Here is a section:
I like the way things have gone during my lifetime, which conveniently spans 99% of the post-war period I have been discussing. Some of our government expenditures have certainly been misspent, both at home and abroad, and our national debt is nothing to celebrate.
I have enjoyed living in a peaceful, prosperous, and increasingly healthy world, and I’m not eager to see that change. Just a couple of months ago, the US economy was performing well, the outlook was positive, the stock market was at an all-time high, and there was much talk about American exceptionalism.
Now, if Trump’s tariffs are put into effect, the US economy is likely to experience a recession sooner than otherwise would have been the case, higher inflation, and extensive dislocation. Even if the tariffs are reversed entirely, it is unlikely the other nations will dismiss this incident and conclude that they have nothing to worry about in terms of relations with the US.
No one should rule out the achievement of some of the goals of tariffs listed above. US manufacturing could increase, bringing new jobs and more dependable supply chains. Our treatment in world trade could become fairer and the Treasurys take could increase.
On the other hand, some of the hoped-for benefits are probably beyond reach. In particular, as for reducing our trade deficit, the US is unlikely to ever buy less from other countries than they buy from us as long as the US is bigger and more prosperous and thus has greater buying power. This will be especially true as long as our workers are better paid, meaning most US-made goods cost more than goods produced elsewhere.