[By Financial Times, translated by Ma Li, compiled by Observer Network Guo Han]
In mid-February this year, the most powerful investors and business tycoons on Wall Street (who manage thousands of billions of personal wealth and tens of thousands of billions of assets) queued up like star-struck teenagers waiting for a rock concert to begin.
Donald Trump was the main attraction of the event. In a crowded auditorium on Miami Beach, the wealthy and CEOs waited for three hours just to hear the president's live speech, his first address to the business community since taking office.
When President Trump finally stepped onto the stage an hour late, the crowd erupted in cheers. Among those present were Robert Smith of American private equity firm Vista Equity, Nir Bar Dea, CEO of Bridgewater Associates, and Josh Harris, co-founder of Apollo.
"If you want to build a better future, break boundaries, unleash innovation, transform industries, and make big money," said President Trump, "there is no better place than the United States under the leadership of a President named Donald Trump, both now and in the future."
The soaring financial markets seemed to confirm these bold words. After four years of close scrutiny and constant criticism from the Biden administration, the "animal spirits" of America's financial elite could finally be unleashed.
On the evening of April 10 local time, the three major U.S. stock indexes plummeted again, and Trump admitted at a cabinet meeting that there were "transitional problems" with the policies.
At the time, few people were concerned about the more radical elements in Trump's speech, such as his threat to impose reciprocal tariffs on countries that "unfairly treated the U.S." A participant who had contact with Trump's camp at the time said, "No one mentioned the word 'recession' or 'depression.' I think this sends a very strong signal that business leaders and investors are both optimistic and pragmatic."
However, less than eight weeks later, the situation rapidly reversed. Trump's trade war, launched on April 2, disrupted financial markets, raised concerns about inflation, and issued warnings of economic recession, and the audience at that speech had already entered crisis response mode.
But before the trade war, the U.S. financial industry was already showing signs of decline: corporate merger and acquisition volumes hit a ten-year low, top law firms faced criticism from the White House, and consulting industry giants lost government contracts. Many companies, from Delta Airlines to Walmart, downgraded their profit forecasts. Many were worried that the tariff hikes would severely damage the U.S. economic engine.
A senior Wall Street executive candidly admitted, "We misjudged him. We thought that people in the government who understood economics would dissuade him from such a foolish move as imposing tariffs on the entire world. We are destined to ride a roller coaster for a while."
This suggests that even the most ardent Trump supporters in the U.S. business community misunderstood the 78-year-old president's determination to completely overturn U.S. economic policy and reverse decades of globalization. During his campaign, Trump and his closest advisors repeatedly stated that they would not formulate policies based on the needs of America's wealthiest families.
At the Republican National Convention last July, Republican vice-presidential candidate James David Vance (JD Vance) clearly stated, "President Trump's vision is simple yet powerful. Ladies and gentlemen, we are no longer catering to Wall Street; we will focus on serving ordinary workers."
Meanwhile, Treasury Secretary Scott Bessent, who once worked as a hedge fund manager, also expressed similar views multiple times. In March this year, he told CNBC, "MAGA (Making America Great Again) does not mean 'Making Mergers & Acquisitions Great Again' (Make M&A Great Again)."
The announcement of the tariff increase was a key turning point for Wall Street. Within just two days, the market value of the S&P 500 index evaporated by more than $5 trillion. In stark contrast to his obsession with the stock market during his first term, when the Wall Street crash occurred, President Trump sometimes ignored reporters' questions and declared that he was "not paying attention to the stock market dynamics."
As the stocks of powerhouse financial institutions like BlackRock, Apollo, and JPMorgan Chase began to fall, the tone from the White House changed. White House press secretary Karoline Leavitt said, "This morning, I want to say to everyone on Wall Street, please trust President Trump."
High-paid bankers, lawyers, and company executives in the U.S. began to realize that this new administration did not care about the impact that changes in trade policy might have on the "golden palace" on which the financial sector relied.
After "reciprocal tariffs" triggered volatility in U.S. and global stock markets, renowned hedge fund manager Bill Ackman made rare criticisms on social media. Image source: Bloomberg
Most people remained silent, grumbling privately about high tax rates, opaque calculation methods, and lack of logic. Billionaire hedge fund managers such as Bill Ackman, Dan Loeb, and Cliff Asness vented their dissatisfaction on X platform, and Wilbur Ross, Trump's former commerce secretary, told the Financial Times bluntly, "This method of calculating tariffs is quite unusual."
Some put it more plainly. Anthony Scaramucci, founder of investment firm SkyBridge Capital, pointed out, "He wants to end the global trading system, he wants to weaken the U.S., and let the U.S. detach itself from the world like 'Brexit,' which is the stupidest economic policy the U.S. has ever formulated." Scaramucci briefly served as White House communications director during Trump's first term.
Business elites initially thought that tariffs were the price they had to pay to gain benefits from the Trump administration, including relaxed antitrust enforcement and significant tax cuts.
However, Trump's insistence on escalating the trade war to disrupt Wall Street led to a lasting trust crisis and raised concerns that the financial models guiding business activities could no longer predict what would happen next. More than ten investors and corporate executives expressed these views to the Financial Times.
"Given our current state of ignorance, investing now is like betting on which team will win at the beginning of the Super Bowl without knowing which teams are competing or who the players are," Howard Marks, co-founder of Oaktree Capital, pointed out. "Investing largely relies on the assumption that 'the future will resemble the past,' but this seems no longer reliable."
President Trump is the son of a New York real estate developer and graduated from the prestigious Wharton School. He has long maintained personal relationships with Wall Street figures, but this relationship has not been smooth.
Insiders revealed that the president often felt snubbed by Wall Street's financial circles. An unnamed person close to Trump said that in the 1980s, when Trump sought financing for his real estate projects, financial elites either avoided him or mocked him as a pretender. "Trump was destined never to become the president of Wall Street."
Nevertheless, during his first term, he included financial figures in his core team, appointing two senior executives from Goldman Sachs—Steven Mnuchin as treasury secretary and Gary Cohn as chief economic advisor.
Moreover, Trump formed an organization called the "Strategic and Policy Forum," whose members included Jamie Dimon of JPMorgan Chase, Larry Fink of BlackRock, and Stephen Schwarzman of Blackstone Group, among other Wall Street heavyweights. Trump frequently met with them in front of the cameras.
However, this relationship deteriorated during his first presidential term. The January 6, 2021, insurrection at the Capitol marked a complete rupture between them. Stephen Schwarzman, who once chaired Trump's business forum, described the rebellion as "appalling." Other figures in the financial industry also condemned it, and the entire industry began to distance itself from Trump. In 2022, Schwarzman stated that the Republican Party needed to turn to a new generation of leaders, indicating that he would not support Trump in the 2024 election.
Trump's allies remembered this account. "These people never took him seriously," said a senior figure in the financial industry closely associated with Trump. "Where were most of Wall Street when Trump faced legal attacks during his first term? How did they align themselves during the election? They supported Kamala Harris, not Trump. Why should he care about Wall Street's feelings now?"
It wasn't until signs emerged that Trump might win the election that opposition voices from Wall Street disappeared. Schwarzman returned to Trump's camp in May 2024, declaring, "Supporting Trump is supporting change." Others followed suit.
After the November 2024 election, David Solomon, CEO of Goldman Sachs, said he was "quite optimistic" about Trump's growth agenda. Jamie Dimon defended the newly imposed tariffs, calling them a policy beneficial to national security, and told viewers on CNBC to "look forward." Private equity firms that once supported Trump's opponents donated millions of dollars to the presidential inauguration fund in hopes of regaining influence.
However, during Trump's second term, these individuals rarely received the president's favor. A head of a private investment company complained, "A closed echo chamber has formed around Trump. Besides Treasury Secretary Bessent, no one can really participate in decision-making, and there is no room for dissenting voices. This is completely different from when Gary Cohn brought balance to the views."
On March 6, U.S. Treasury Secretary Bessent delivered a speech at the New York Economic Club. Wall Street Journal
Trump has shown that he is determined to strike back at those who appear disloyal. His vengeful nature was most evident in his battles with top law firms. According to estimates by the Financial Times, Paul Weiss and Skadden Arps, among others, reluctantly agreed to provide nearly $1 billion worth of pro bono legal services for some projects of the Trump administration due to fears that angering the White House would affect their businesses. Due to concerns that a casual remark might invite rebuke from the White House, these firms' executives now speak with great caution.
"They fear the president... They don't want their banks or families to get sued. Moreover, they have been instructed by their boards to watch their words and actions carefully," Scaramucci said. "By the way, we don't even have a law firm that can defend us because basically every major law firm has been dealt with by the president."
Michael Cembalest, head of Morgan Stanley's Markets and Investment Strategy division, hinted at this chilling effect in a report he presented to clients this month. "This is the first time I've had to be extremely cautious in a conference call. Of course, my remarks reflect our views on the market and economy, but there is more to my caution than that," he said at the end of the report. "I have to consider how this will affect this company and some colleagues in a situation where people have to take responsibility for their views and statements."
At an event at the New York Economic Club in early April, someone asked Larry Fink of BlackRock about Trump's use of executive orders to attack law firms, including Skadden Arps, BlackRock's preferred legal counsel, but he refused to answer. "Let's change the topic," the head of the largest asset management company said.
This chilling effect sparked concerns that the president, known for his capriciousness and "the art of the deal," seemed unmoved by external influences.
Those who know Trump said that the financial community misunderstood the driving factors behind the administration's policy agenda. "All the things he wants to do—tax cuts, deregulation, making deals—are all to help the voters who got him elected, those Americans living in small towns who don't exist in the eyes of New York elites," said another anonymous person close to Trump. "He is a populist serving the common people."
When Trump later decided to temporarily suspend the imposition of tariffs, it was not because the financial elite succeeded in幕后 manipulation.
Just before dawn on April 9, global financial markets were in a state of collapse, and the president noticed it. Trump later said that the bond market was "overreacting" and admitted that he had been closely monitoring the escalating turmoil.
Only one influential figure in the financial community caught Trump's attention. That morning, Jamie Dimon of JPMorgan Chase explained persuasively but gently why the trade war should be paused. However, Dimon did not discuss this face-to-face with Trump at Mar-a-Lago or the White House; he expressed his views on Fox Business News.
The market situation was no longer "adverse" but had reached the "alarm" level. "The fact that the bond market is moving in a worrying rather than reassuring direction is a major turning point that has put everyone on Wall Street in different states of tension," Lawrence Summers, former U.S. Treasury Secretary and former Harvard University president, said. He noted that the trading pattern of U.S. Treasury bonds suddenly became similar to that of emerging market debt. Meanwhile, the dollar was weakening.
The collapse of the bond market partly stemmed from Japanese and American hedge funds clearing risky "basis trades," a complex but highly leveraged strategy that has long been considered a kind of "trigger" during panics. At the same time, foreign investors began withdrawing from the U.S. due to Trump's tough stance.
Crisis situations also appeared elsewhere. The credit markets on which lower-rated companies and private equity firms typically rely froze, and even blue-chip companies found themselves shut out by the bond market. After a week of turmoil, Trump partially suspended reciprocal tariff measures. "The president can accept some losses on Wall Street, but he doesn't want the whole system to collapse," a person close to Trump told the Financial Times. It was the market that forced Trump to change his actions. This fact shows that even if financial elites continue to be marginalized in this administration, Trump's political fate remains closely linked to the fate of financial elites. Even though Trump has set out to reshape the global trade landscape, he still faces many "landmines" in the financial system. The private capital industry worth $13 trillion controls half of the U.S. economy and employs over 10 million Americans, yet the entire industry is built on debt. Years of leveraging have left many small and medium-sized enterprises fragile and vulnerable to shocks. With slowing economic growth and rising inflation, private equity companies may cut jobs to reduce costs, further exacerbating economic difficulties. Default rates are rising and may soon surge dramatically, triggering a wave of bankruptcies. Large pension funds heavily invested in private markets may also come under pressure. Trump said that to ensure his plans were implemented smoothly, he was willing to endure economic pain. "This is an economic revolution, and we will certainly triumph," he wrote on social media on April 5. A White House statement on April 14 emphasized, "The only factor that can influence President Trump's decisions is the best interests of the American people." However, the market has begun to counterattack: bond yields remain high, the dollar has depreciated significantly, and Trump's government's financial situation looks increasingly precarious. Summers said, "Clearly, confidence has not been restored. On April 10 and 11, the dollar depreciated sharply, and yields were at extremely high levels. Everyone is watching." For now, the future remains full of uncertainty. "The introduction of 'Liberation Day' fundamentally shook Wall Street's confidence in predicting how the government would act. Now they realize that everything is fundamentally uncertain and unpredictable," Joseph Forte, an economics professor at New York University Stern School of Business, said. (Originally published as the lead commentary on the Financial Times website, titled: How Wall Street Misread Trump. Translation provided for reader reference only, not representing the views of the Observer Network.) This article is an exclusive contribution from the Observer Network. The content purely reflects the author's personal views, which do not necessarily represent the platform's position. Unauthorized reproduction is prohibited, and legal action will be taken for violations. Follow the Observer Network WeChat account guanchacn for daily interesting articles. Original article: https://www.toutiao.com/article/7494826706746802726/ Disclaimer: The article solely represents the author's views. Welcome to express your attitude by clicking the 'Top/Downvote' buttons below.