The US stock market absolutely hates President Donald Trump’s tariff proposals. The day after they were announced, the S&P 500 fell 5 per cent, its worst day since 2020, and the pain continued on Friday. Tech stocks, small companies and banks are getting the worst of it. At one level, this is easy to explain: everyone agrees that tariffs will increase costs for US companies and drag their earnings down, at least in the short and medium terms. Stocks are priced in part on earnings.

Depending on your personal theory of how tariffs work, you might think lower earnings and stock prices today are an acceptable price to pay for, say, higher domestic production and wages tomorrow. That appears to be what Trump meant when he said tariffs would cause “a little disturbance, but we’re OK with that”.

But markets have a bigger problem than the prospect of short-term falling profits. Investors and companies can adjust to most things, when they know the rules. With Trump, the rules are always changing.