Why tariffs ‘aren’t the problem’ in the stock market: Veteran trader

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Markets are becoming rattled by the escalating trade talks as President Trump expands on the tariff policies from his first term.

Stocks fell Monday, with the S&P 500 (^GSPC) logging its worst day of 2025, after Trump reiterated that 25% tariffs on goods from Mexico and Canada would go forward on March 4. Trump also vowed that the US would levy an additional 10% tariff on Chinese imports.

The shifting mood in the market echoed similar moves this year following tariff headlines. According to Wall Street veteran Kenny Polcari, “Tariffs aren’t the problem. Investor panic is.”

“Every time tariffs hit the headlines, the market throws a fit, stocks dive, the media screams trade war, and investors act like it’s 2008 all over again,” Polcari argued on Yahoo Finance’s Trader Talk podcast (see video above or listen below). “But let’s just take a step back. Are tariffs really the disaster that they’re made out to be?”

The major indexes have been down over the past month as Trump floated several new tariff ideas, including reciprocal tariffs and new duties on steel and aluminum, among other products. But although tariff concerns have been front and center, investors have seen stocks rebound from sharp downturns.

Read more: What are tariffs, and how do they affect you?

“The knee-jerk reaction was ridiculous,” Polcari said of the sell-off in early February when Trump announced tariffs on Mexico and Canada. “Stocks tanked, volatility spiked, and algorithms panicked.”

“But what happens when the dust settles?” he continued. “Executives adjust. Trade deals get renegotiated, and investors realize that the world is not ending. Those who stay calm and position themselves accordingly will usually win.”

President Trump has touted that tariffs promote domestic jobs, goods, and services and that the increase in government revenue would allow the US to pay down the country’s national debt — which currently sits at $36.5 trillion.

However, forecasters note that the cost of tariffs often falls on consumers, who pay higher prices for everyday goods imported from abroad.

Still, Polcari argued that investors’ tendency to adjust their investments in anticipation of potential impacts from tariffs may be hurting as much as or more than the tariffs themselves.

“If you’re dumping stocks because of tariffs, you’re doing it all wrong,” Polcari said.

Great Hill Capital chairman and managing member Thomas Hayes agreed, saying that despite the panic these tariffs have caused in the short term, the effect will likely be neutral in the long term.

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“It’s a fear of the unknown,” Hayes said. “At some point, you have to step back when these stocks sell off because they have exposure to China, or they have exposure to Mexico, or they have exposure to Canada. You say, ‘Wait a second. If I look back at their free cash flow and revenues two years from now, it’s going to be a little blip on the radar. It gets evened out.’”

So what should investors do in this time of economic uncertainty? Polcari suggested investors “pay attention to where the money is moving.”

“Look at companies with strong balance sheets, pricing, power, and diversified supply chains,” he said. “Watch how the industry shifts. This is where real opportunity is found — not in panic selling, but in smart positioning.”

“The bottom line,” he added, is that “tariffs are not the end of the world, but emotional trading — that’s what really kills your returns.”

Each week on Trader Talk, Wall Street veteran Kenny Polcari brings you expert advice and key market insights from the New York Stock Exchange. You can find more episodes on our video hub or watch on your preferred streaming service.