Global Trade and Finance 4: Tariffs, Rate Cuts, and Market Shifts

 

Michael Ashley Schulman, CFA, Chief Investment Officer of Running Point Capital Advisors, offers expert insight into current global financial dynamics. Schulman offers timely insights into macroeconomic trends, US fiscal policy, and the global tech landscape. In this in-depth July 2025 interview, economist Michael Ashley Schulman analyzes how US–China and US–UK trade negotiations contributed to record equity market highs despite geopolitical volatility. He explores the US dollar’s decline, driven by fiscal policy under Trump’s administration, and highlights mixed progress in bilateral trade talks.

As of mid-2025, the U.S. imposed a 10% baseline tariff on nearly all imports with reciprocal rates up to 50% striking about 66 countries, later widening to hundreds of products and hinting at semiconductor duties up to 300%. Supply chains shift toward friendshoring, regional “slowbalization,” and complex rerouting, pushing costs higher while accelerating automation and AI logistics. India moves from favored to targeted: a 25% reciprocal tariff effective August 7 plus an added 25% penalty August 27; a ₹40 billion credit guarantee barely helps. Equities rallied on strong earnings and rate-cut hopes. Institutional credibility still dictates capital, valuations, and resilience.

Interview conducted August 28, 2025. 

Scott Douglas Jacobsen: How might the U.S. tariffs on 66 countries reshape global supply chains?

Michael Ashley Schulman: U.S. Tariff Route 66! You’re poking at a wonderfully twisted question, and tariffs are indeed the quirkiest of tax pirates! The original Route 66 begins in Chicago, Illinois and ends in Santa Monica, California. The Tariff Route 66 is global (and possibly unending). Let’s unravel this windy knot with clarity and snark.                                                                                                                                 

As of mid‑2025, the U.S. has imposed tariffs on imports from approximately 66 countries, plus there are broader baseline tariffs affecting many more, stretching to nearly every trading partner. So, the perceived number is higher than 66. 

On April 2, 2025—Liberation Day—the administration slapped a 10% baseline tariff on nearly all imports, with additional reciprocal tariffs (up to 50%) aimed at around 60 countries and territories. Fast forward to later in the summer, and things got juicier. A report flagged 66 countries, the European Union, Taiwan, and even the Falkland Islands—all hit with these sweeping tariffs. In case you are wondering, we import frozen seafood and wool from the Falklands. 

I just wanted to set the scene; now to get to the heart of your question regarding supply chains.

We gave a heads-up and restarted the tariff conversation with our family office clients last year when Trump started climbing in the presidential polls and betting sites. Tariffs are like boulders dropped into the river of global trade; they don’t stop the flow, but they force it to twist and carve new channels. When the U.S. slaps tariffs on countries, it doesn’t just mean American importers pay more. Yes, that’s right, U.S. tariffs are a tax paid by the American buyers of foreign goods; they are not paid by the foreign sellers. There is a misconception that it’s foreign countries or foreign companies that directly pay the tariffs we impose but that’s not the case. Buyers can ask foreign sellers for concessions or price breaks which in turn creates thousands of inefficient private one-off discussions and negotiations. 

Tariffs set off a chain reaction through production networks, logistics routes, and even diplomatic alliances. Let’s unpack the supply chain chessboard this creates. 

Companies already dabbling friendshoring (moving production to politically friendly nations) will accelerate the trend. For example, instead of importing directly from China, firms might ship components to Mexico for final assembly, exploiting USMCA trade rules. Think of it as the corporate version of routing your Amazon delivery through your office or a neighbor’s door to dodge a porch pirate.

When tariffs get this broad, supply chains don’t just move, they camouflage. Goods might be rerouted through intermediary countries with lighter trade frictions. This means more complex customs paperwork, longer shipping times, and the birth of creative labeling schemes–Is this really a Turkish washing machine, or a Chinese one wearing a fez?

Fragmentation of global networks means that instead of the old “just in time” model which relied on scale and seamless flows, firms may regionalize supply chains into Americas-centric, Europe-centric, and Asia-centric networks. That reduces efficiency but increases resilience; call it “slowbalization.”

​**No, I didn’t make up that term–wish I had–it’s been around since at least 2019.**

Imagine supply chains less like a spiderweb and more like a patchwork quilt, stitched with thicker threads within each bloc.

These shifts in commodity and component sourcing mean that Southeast Asia may capture even more of the semiconductor assembly and testing work once clustered in China and Taiwan. When it comes to cars, North American suppliers may see a renaissance, though at higher consumer prices. And tariff hit energy and minerals producers may dump excess supply into China, Japan, Korea, or the EU at discount prices, redrawing resource maps.

We tell the business owners that we advise that tariff knock-on effects could be felt on inflation and innovation with higher input costs rippling into consumer goods, tightening margins and raising prices. Some firms will pass costs along, others will eat them, and some may decide it’s cheaper to automate domestically rather than chase tariff-free factories abroad. Ironically, that could accelerate robotics, AI logistics, and micro-factories close to end consumers.

Geopolitically, countries outside the tariff dragnet suddenly become highly attractive trade partners. Trade alliances may shift, with U.S. allies and China potentially finding themselves on the same side of a U.S.-imposed wall. It’s supply chain War Games with blocs fighting for survival and market share. The tariffs won’t stop globalization, but they’ll warp it. Expect higher costs, slower flows, and more regional clustering. The real story isn’t just about where your phone is made, but how many passports its components rack up before it lands in your pocket.

Funny enough, what may matter most here in the U.S. is the Fed lowering interest rates so that corporations can better afford the financing to build domestic factories and automate with robotics. I could easily transition into one of my past harped on economic themes: that at this point in the US cycle, lower interest rates are not inflationary, but deflationary because they make manufacturing (and goods production) much more affordable. Lower interest rates would make this entire manufacturing at-home transition much more affordable. 

In a BEST-case world, companies quickly lean into “friendshoring,” routing final assembly to tariff-friendly hubs while scaling U.S. advanced manufacturing in semiconductors and automation; costs stabilize after a short inflation bump. The more likely BASE-case is patchwork regionalization where firms split their supply webs into Americas, Euro-Med, and Indo-Pacific blocs, rationalize product lines, and use tariff-hopping via compliant final assembly. Inflation stays a notch higher, but the system adjusts around a permanent tax wedge. The WORST-case is transshipment games and retaliation where Washington cracks down with anti-circumvention cases, partners respond in kind, and global supply chains fragment further, raising costs, bloating inventories, and eroding productivity; I believe that goods found to be transshipped to evade tariffs face a 40% tariff, plus potential additional penalties.

The unstable current and warped planning is evident in fresh POTUS tweets and ever-changing frameworks. Case-in-point, India recently moved from friendshoring candidate to tariff-challenged for U.S.-bound supply chains. On July 31, 2025, the White House issued an order that set India’s reciprocal tariff at 25%, effective August 7, 2025 (it replaces the 10% baseline for India). A separate Russia-related action issued the following week adds an extra 25% “penalty” tariff on Indian-origin goods effective August 27, 2025, bringing the stacked additional duty to 50% on many items. Near-term reroutes may tilt harder toward USMCA (Mexico/Canada) and select Southeast Asia lanes, with stricter origin/compliance work to avoid anti-circumvention snags.

 

Recently (last Friday), President Donald Trump stunned by turning a narrow steel and aluminum cover charge into an all-you-can-tariff buffet, slapping more than four hundred everyday items—from motorcycles to tableware—while giving customs brokers and importers roughly zero runway; the duties hit the next business day with no mercy for goods already at sea. The net now snags a bewildering array of items, a flex of how far sector tariffs can stretch, and it sits apart from the so-called reciprocal play. This tranche goes broad and oddly domestic, tagging cargo-handling gear, auto parts, furniture, baby booster seats, and personal care that merely arrives in metal tins, a quiet pivot in how steel and aluminum derivatives get policed. The real bruise is not just the rate but the maze of overlapping levies, shifting codes, and a budgeting and compliance tax that never shows up on the price tag. Think supply chain escape room meets pop quiz, where the room keeps moving and the answers are buried in customs footnotes.

Trump also said semiconductor tariffs will be set in the next couple weeks that could reach 300%. Surprise complexities like this are a true challenge to business planning; semiconductors are used by everyone.

Jacobsen: Why did markets rally in spite of the escalating tariff tensions?

Schulman: Tariffs were the distraction, not the main concern; or to quote an adage, it’s the economy stupid. Stocks rallied not because tariffs disappeared but because louder music drowned them out; second quarter profits beat the script, led by cash rich platforms riding the artificial intelligence wave, which eased recession jitters and floated valuations, while July consumer price data kept dreams of gentler policy alive. Investors judged the tariff hit as a manageable tax wedge, with many companies passing costs along, rerouting final assembly to friendlier ports, or enjoying a bit of home field protection. Profits and policy hope headlined the show, tariffs opened as the bad warm up act, but the market left singing along with the catchy headliner hits.

Despite tariff confusion, economic growth was a strong 3% in the second quarter, unemployment remains reasonably low, and investors keep hoping and expecting a Federal Reserve interest rate cut which would help risk assets to rally further. Even though the Fed has sorely disappointed many observers by not cutting rates so far this year, it just makes those forecasters even more adamant that the Fed will cut at the next meeting. I don’t know if it’s a case of misplaced hope or just adamant belief like the person that never takes “no” for an answer. 

Jacobsen: Are U.S. tariffs on Indian exports a protectionist decision or a geopolitical calculation?

Schulman: Both, in stereo. The 25% reciprocal rate on India is classic home turf protection dressed up as fairness, with the White House saying it aims to fix lopsided deficits and shore up domestic industry and national security. An extra 25% that starts on August 27 is a geopolitical lever disguised as a customs bill tied to India’s intake of Russian crude and meant to raise the price of neutrality.

Think of the United States as the club owner who loves to talk about open doors while quietly hiking the cover charge at the velvet rope; that is the protection part, a not so free trade that is really fee trade to shield the local D.J or band and keep the margins fat. Now add geopolitics as the doorman whispering rules that change if you roll up with the wrong entourage; buy your oil at the rival bar and the cover doubles later this month. It is where the host smiles for your selfie-photo and then hands you a bill marked duty calls. The goal is to push India to pick a lane and to pay up if it will not, while telling voters this is fairness not a food fight. Snark aside, it is one maneuver with two payoffs, pricing power at the port and pressure on the gameboard.

Jacobsen: Will India’s ₹40 billion credit guarantee scheme offset the damage caused by the tariffs?

Schulman: Ughhhh, doubtful! India seems more complex from a demographic and corporate perspective than the U.S. Short answer, no, this is duct tape on a cracked dam. The forty billion rupees planned credit guarantee covers only a sliver of bank risk on loans that are late for small exporters, which helps cash flow but does not erase a price handicap at the dock. India sold nearly $80 billion of goods to America last year—maybe check me on that—and more than half of that flow now runs into the new tariff wall, with many items facing a stacked 50% hit by late August, which means a tariff bill in the tens of billions that no guarantee can wish away. Think of it like trying to beat a luxury surcharge with a store credit card, nice for the points, useless against the sticker shock. The scheme may keep some textile and jewelry firms on life support and buy time while banks and ministries triage, but the arithmetic still screams relocation, re-pricing, or lost share until the policy weather changes.

I may need to explain this better since as I mentioned earlier, it is the importer that writes the check to the U.S. government. However, as I also mentioned, tariffs create thousands of inefficient private negotiations to split the tariff bill at the figurative dinner table. It’s tricky. Tariff incidence is a tug-of-war over margins and volume. If the importer can push prices to shoppers, the consumer pays; if demand balks, the importer leans on the supplier to cut the export price, so the exporter eats part of it; if a cheaper substitute exists in a friendlier country, the Indian exporter just loses the order and pays with lost revenue, which is the most expensive currency of all! The credit guarantee helps cash flow for firms that survive this do-or-die reality show round, but it does not erase the wedge at the dock or bring back the orders that never ship.

Jacobsen: Are central banks beginning a newer phase of synchronized global monetary easing?

Schulman: No, not beginning because many central banks already have begun, but it is not a synchronized huddle so much as a messy café crowd where some friends are sipping decaf lattes, others are in the back staring at the menu, and one big one is insisting on full throttle double espresso. The Federal Reserve has held steady so far in 2025 and is still evaluating options, Europe pressed pause after a string of reductions, the Bank of England cut a quarter point on August 6, the Bank of Canada last cut in March to 2.75%, and Japan is the odd caffeinating one tiptoeing toward normalization by raising rates rather than easing. You may recall that in March 2024, after 17 years, the Bank of Japan (BOJ) ended its negative interest rate policy and raised short-term interest rates to between 0% and 0.1%; they further raised rates in mid-2024 and the beginning of 2025.

Across emerging markets the crowd is decaffeinating. The backdrop enabler has been a significantly weaker U.S. dollar brought about by President Trump’s tariff and fiscal turmoil which has eased currency and inflation pressure enough for several emerging central banks to ease without inviting a run on their exchange rates. A weaker U.S. dollar makes it easier for EMs to repay their dollar denominated debt and allows them to lower interest rates without causing their local currency to weaken relative to the dollar. I believe Mexico recently cut rates again, Chile restarted cuts in July, Colombia, Peru, and the Czech Republic trimmed in the spring. China is playing its own tune, loosening with a reserve-requirement cut and a small policy tweak while keeping lending benchmarks steady and leaning on property and consumer-credit support rather than a big-bang rate slash.

Jacobsen: What happens if the U.S.–China tariff moratorium expires and then there’s no renewal?

Schulman: Possibly more tweets, more threats, and more suspension of belief by the market. Formulaically, however, if the truce lapses, the playlist flips from lo-fi détente to speed-metal tariffs in one beat. Suspended China-specific hikes snap back above the 10% baseline, import costs on China-origin goods jump, and buyers reroute or cancel orders while compliance folks start mainlining antacids. It is not good for either side. Consumers and businesses can expect a quick price up bump in electronics, machinery, toys, furniture, and the like as importers test pass-through, plus more audits and seizures now that the small-parcel loophole is already shut for China and is ending broadly in August. No more hiding in the de minimis coat closet.

On Beijing’s side, if I’m being strategic, a smart reply-guy move is to tighten the licensing spigot on gallium, germanium, graphite and other choke-point inputs. Call it death by paperwork delay rather than a headline ban. This will crimp critical battery, chip, and magnet supply. Markets would treat it like a risk-off squall or storm. American names with heavy China sourcing or sales take a valuation haircut, Mexico and other USMCA finishers get a sympathy bid, and the dollar-yuan vibe check gets spicy. The politics get louder and the supply chain math gets meaner; pay up, pivot to North America and parts of Southeast Asia, or eat the margin hit and pray for a holiday miracle. Think The Bear’s kitchen—the FX/Hulu series—at dinner rush where service is a beautiful panic; orders still go out, but there’s yelling, fire drills, triage, and a lot more burnt toast than anyone admits.

Jacobsen: Are global equity record highs signaling a bubble?

Schulman: That’s the funny thing about record highs, they only occur at or near record highs. We tell our family office clients that people point to this as a bad or scary thing, but by definition it is the only way it occurs.

The tells that keep me out of the doomsday bunker are that breadth isn’t pure mania; the median stock still lags its peak and leadership is concentrated in a handful of heavyweights whose cash flows are actually growing. The counterpoint is equally real; the equity risk premium has thinned to a five-year low, so the cushion under prices is more yoga mat than mattress, and any mix of stickier inflation, a hawkish central-bank remix, or an earnings wobble could turn the bubbly into flat soda fast. Call it froth with fundamentals and not dot-com cosplay; it is just a market that needs the hits to keep coming.

The U.S. economy is resilient,…and weird. From surging GDP estimates to a cooling manufacturing sector to high construction spending, the economy remains a study in contradictions. It is neither hot nor cold, but instead managing a strange, contradictory equilibrium—driving with one foot on the gas and the other hovering over the brake. For investors, this presents a balancing act. The Fed is still in restrictive mode, geopolitical risk is elevated, and yet the core economic engine refuses to sputter. We continue to position portfolios with an eye toward durability, quality earnings, balance sheet strength, growth, and select private opportunities, while maintaining flexibility to adapt as the macro picture evolves.

We tell our family office clients that you have to separate individual nuances from broad trends in both the domestic and the international markets! Individual stocks trade up and down on subtleties; they report earnings it looks positive then management says something that makes the outlook cloudy and it goes down; maybe there’s a twist in margins or marketing expenses that cause analysts to turn favorable or negative. But the broad market seems to be in a melt up fueled by still high corporate margins and profits, consumers still spending, unemployment still relatively low, and the rate of change and shock from bad news declining. Maybe the news is worsening, but it’s getting worse at a lower rate.

You also want to look at other risk-on indicators (or sentiment barometers). Bitcoin, Ethereum, and gold are near record highs, meme-stocks are making a comeback, e.g., Opendoor Technologies which has never seen profits had a 314% 6-day rise. And there have been over 200 U.S. IPOs already priced this year, double last year’s pace. U.S. companies have managed to sustain margins and the U.S. consumer continues to do what it does best, spend. Perhaps most telling, stock investors seem to reason that if bond markets aren’t concerned about the deficit-expanding potential of Trump’s Big Beautiful Bill, neither should they be.

Emerging country stocks and businesses—apologies if it seems like I’m rambling, there is just so much to cover—EM equity and bond markets have been propped by lower interest rates as a weaker U.S. dollar has allowed EM central banks to cut interest rates. 

Additionally, and importantly, a booming AI industry not only is a catalyst for chip and energy growth but also increasing productivity and margins for companies around the globe. Generative Ai may be American or Chinese, developed by Open Ai, Gemini, Anthropic or Baidu, Alibaba, DeepSeek, or SenseTime, but companies in Europe, South America, and the rest of Asia can tap into it to improve productivity and margins. AI is a great equalizer for businesses around the world; they don’t have to spend hundreds of billions to develop, it but can just tap in and rent it. 

Jacobsen: How is political interference in economic institutions affecting global investor confidence? What do you think about the region?

Schulman: I may have mentioned this in a previous interview: government and politics, rule and law, are economic interference by definition. Perception on whether the intrusion is helpful or detrimental makes the difference. When politicians lean on the referees, markets start pricing in a rigged game. Confidence rides on boring, rules-based institutions; meddling swaps a predictable rulebook for improv, which investors translate into wider risk premiums, weaker currencies, and shallower capex. You can see the spectrum. Mexico’s push to elect judges spooked capital because it blurs contract enforcement; the peso told you what it thought in real time. Turkey is the flip side; after years of political cross-traffic, a hard pivot to orthodox policy rebuilt some credibility and the central bank keeps telegraphing price-stability first.

For the Gulf and its neighbors, policy frameworks, dollar pegs, and steady reforms support low inflation and non-oil growth, and the International Monetary Fund keeps handing out gold stars for institutional upgrades. The United Arab Emirates continues to court capital with deepening foreign-ownership access and predictable legal venues, which is catnip for global allocators.

Institutional credibility is the ultimate multiple-expander; it has been foundational to U.S. growth leadership or what some call exceptionalism. Where the rulebook is clear and insulated from the politics of the week, money stays sticky; where the scoreboard operator starts taking calls from the owner’s box, the cost of capital quietly drifts north.

Jacobsen: Thank you for the opportunity and your time, Michael. 

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Scott Douglas Jacobsen is the publisher of In-Sight Publishing (ISBN: 978-1-0692343) and Editor-in-Chief of In-Sight: Interviews (ISSN: 2369-6885). He writes for The Good Men Project, International Policy Digest (ISSN: 2332–9416), The Humanist (Print: ISSN 0018-7399; Online: ISSN 2163-3576), Basic Income Earth Network (UK Registered Charity 1177066), A Further Inquiry, and other media. He is a member in good standing of numerous media organizations.

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