Europe battens down as Hurricane Trump hits stocks, shoppers, weathermen
(Originally published March 17 in “What in the World“) If life imitates art, then the massive wave of tornados that struck the central United States this weekend was just Nature’s rendition of the storm scattering the U.S. economy.
At least 37 people were killed and 100 million put at risk by the powerful storm system stretching from the Midwest to the Southeast over the weekend. The National Weather service said it could rank as “one of the more prolific severe weather outbreaks in recent memory.” The service has struggled to respond after Trump’s layoffs last month of 100 meteorologists and 700 other staff at the National Oceanic and Atmospheric Administration.
The Trumpnado has, meanwhile, managed to beat the broader, benchmark S&P500 index into correction alongside the tech-heavy Nasdaq. The S&P500 fell roughly 2% last week to close down more than 10% from its peak Feb. 19 and almost 9% since Trump’s inauguration. Another bellwether for the economy, the Russell 2000 index of smaller listed companies has fallen 10% since Trump too office and appears headed into a bear market.
Stocks fell last week after Trump threatened to retaliate against Europe’s own retaliatory tariffs against American bourbon (among a host of other products) by tripling prices on the $5 billion of French Champagne and European wine that the U.S. imports yearly. The latest tariffs on alcoholic beverages comes atop virtual bans and boycotts already being observed in parts of Canada against American liquor and beer, and in parts of the U.S. against European wine.
Long-term, buy-and-hold investors have been spurred to rotate out of U.S. stocks, many into cash, but also into short-term bonds, gold and international markets, notably European defense stocks. The sell-off is in part a reflection of investors’ fears for U.S. economic growth. While Trump may have convinced himself not to care, falling stocks can become a self-fulfilling phenomenon, as the lower portfolio values prompt wealthier consumers to ratchet back on spending. The latest University of Michigan survey revealed that consumer sentiment fell 11% in March, the third consecutive month of declines. And consultancy RetailNext reports that foot traffic into U.S. stores fell 4.3% in early March compared to the same period in 2024. If stocks, now down only about 4% so far this year, fell 20%, Harvard economist Gabriel Chodorow-Reich estimates, U.S. GDP growth might be cut by as much as an entire percentage point.
Perhaps inadvertently, the pessimism in U.S. markets is also achieving one of his adviser’s long-term goals: reducing the value of the U.S. dollar against major trading partners’ currencies. The dollar index has dropped roughly 5% since Trump’s inauguration and some say Trump is undermining its role as a global reserve currency.
Trump has also managed to discourage potential foreign workers from trying to enter the U.S. Reported numbers of illegal crossings from Mexico are at the lowest level in decades.
But his success in convincing Europe to invest more into its own defense may backfire for one of America’s most durable and high-margin exports. French President Emmanuel Macron is now urging his European neighbors to buy European arms instead of U.S. weaponry. Ukraine’s use of British and French cruise missiles taught Europe a lesson that buying even military parts from Washington comes with strings attached.