Were Wall Street analysts caught unaware of Donald Trump's tariffs and failed to hedge their bets? Deutsche Bank has a brutal wake-up call

Deutsche Bank had a brutal wake-up call for analysts who failed to account for US president Donald Trump’s tariffs, which they had underestimated to become a reality, as per a Fortune report.

"Trump’s tariffs are precisely what he promised," the analysts claimed after Trump's pledge was implemented, with the commander in chief imposing an additional 25% tariff on imports from Canada and Mexico, as well as a 10% added tariff on imports from China.

Threat not taken seriously

According to Fortune's report, the global head of macro research at Deutsche Bank, Jim Reid, said Wall Street analysts were caught off guard by Trump's actions, even though the president had promised such policies throughout his campaign. Reid admitted that analysts "should have seen it coming."


Deutsche Bank's Reid pointed out the shock wasn't the tariffs, but that analysts hadn’t priced in the risks, despite Trump's consistent rhetoric. In a note sent to clients over the weekend, he said, "The market has refused to take that threat seriously, though, completely underpricing the risks."

Reid also highlighted the sheer scale of the tariffs: Canada, Mexico, and China account for around 40% of US imports, totalling $1.35 trillion, reported the Guardian. He noted this was far greater than previous trade moves, including those targeting $350 billion worth of Chinese goods during Trump’s first term.

Markets react

As of Monday, markets have reacted with a negative shift—likely feeling the pressure of Trump’s bold trade moves. The FTSE 100 Index had dropped by 1.2%, the Hang Seng was down by 0.04%, and the S&P 500 fell by 0.5%, reported Fortune.

Short or long-term?

While some analysts are still evaluating whether the tariffs will be imposed only for a short period.

UBS chief economist Paul Donovan said “There is a question as to what will actually happen,” Fortune quoted. “The taxes ... come into effect on Tuesday. The speed with which Trump retreated from taxing imports from Colombia does raise some prospect of these taxes not being put into effect—or being put into effect for a short time."

FAQs

Why are analysts surprised by Trump’s tariffs?
Despite Trump promising these tariffs during his campaign, many analysts didn’t fully account for the risks, leaving them caught off guard when the tariffs were actually implemented.

Will the tariffs last, or are they temporary?
While some analysts, like those at UBS, are unsure, there’s a possibility Trump could backtrack or scale them back, as seen with his previous retreat from taxing imports from Colombia.