Morgan Stanley's Mike Wilson on Trump's Tariffs Threat: 'Here We Go Again'

Trade Negotiations & Market Impact - The market has largely priced in President Trump's negotiating style regarding trade, characterized by aggressive initial stances followed by negotiation [2][3] - The market's current tolerance of this approach may embolden the President to continue [5] - Exhaustion with trade tensions is anticipated around Q3, potentially pressuring policymakers [7] - Tariffs' impact on company margins and revenue is expected to become more apparent in Q3 as older, cheaper inventory is depleted [7][8] Earnings & Company Performance - Consumer companies with limited pricing power and excess inventory are likely to be most affected by tariffs [10] - Negative comments regarding tariff impacts are expected to emerge in late July/early August during earnings season, particularly from companies reporting later [10] - Larger companies and multinationals can mitigate tariff effects, aided by a weaker dollar and lower oil prices [11] Currency & Monetary Policy - A weaker dollar is anticipated over the next 12 months due to expected aggressive rate cuts by the Federal Reserve compared to other central banks [12] - A temporary spike in inflation from tariffs is expected to drive the weaker dollar view [13] - A near-term dollar rally is possible as a counter-trend move, which could negatively impact equities in Q3 [13][14] - The currency market has already largely priced in tariff concerns [15] Equity Market Outlook - US stocks are expected to continue to outperform global stocks [17] - A market cleanout occurred in April, reversing the rate of change in stock performance [17]