Markets have spent months assuming Trump would never go through with his tariff threats. That’s the trade: “Trump Always Chickens Out.” But when that bet becomes the rally’s only pillar, it starts to look less like a strategy and more like a liability.

Doesn’t it?

The second Trump presidency hasn’t even settled in fully, yet the S&P 500 has already notched fresh record highs. The Nasdaq, riding another AI-fuelled wave, is in uncharted territory. European markets, despite being squarely in the crosshairs of the new tariff regime, have so far dipped only modestly. Canadian equities are touching peaks. And Mexican markets are barely bruised. All this even as the US president threatens to slap 30pc tariffs on EU and Mexican imports, 50pc on Brazilian goods, and 35pc on Canadian products not covered under USMCA.

That’s quite a disconnect. A market that shrugs off the potential for retaliatory tariffs, disrupted supply chains, and impaired corporate margins isn’t just complacent; it’s inviting mispricing. And in doing so, it risks triggering the very outcome it’s discounting.

For now, investors appear convinced that Trump is simply posturing to extract concessions. They point to April’s Liberation Day tariffs........

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