Those of us who study trade and investment for a living are, I suspect, becoming exasperated with both the White House stance on tariffs and the way that this is reported in much of the media. US president Donald Trump believes that if a country has a trade surplus with the US it is somehow playing unfairly and needs to be dealt with. But anyone who understands the basics of international economics will recognise the fallacy in both of these beliefs.

Trade takes place based on what economists call “comparative advantage” – countries import those goods that are otherwise relatively expensive for them to produce. And they export what they produce cheaply relative to other countries.

So the UK, for example, has a trade surplus in services but a deficit in goods that are made in low-cost locations. This is similar to the position of the US.

To understand what the US is seeking to achieve, the first questions must be: what are tariffs designed to do? And when are they typically applied? These issues lead to another point. If Trump is so convinced that his tariffs will produce a win-win, why haven’t they succeeded before?

Trade policy in the form of tariffs is designed to make imports more expensive and encourage buyers to switch to domestic producers. This may be an attempt to protect or support local industry, or as part of a bargaining strategy to access others’ markets.

But this assumes two things. First, that the demand for such imports is relatively price sensitive (that is, buyers will be put off by price rises). And second, that there are domestic producers able to fill this gap at an appropriate price.

But tariffs can also cause what is known as “trade substitution” – where the country imports the goods from alternative sources instead.

To illustrate how this can work in practice, the US has long applied tariffs on European whisky, ranging from 10% to 25% in recent years.

The US already produces various drinks that are considered to be similar to whisky. So the reason for importing is likely for variety, or possibly the allure of consuming a premium product like a Scottish single malt. As such, price increases may not encourage substitution away from imports – or it may trigger substitution to other imports with lower tariffs.

An alternative example of the case for tariffs is the steel industry. Many countries believe that they should have a steel industry for strategic reasons, but also because steel is an input into so many aspects of the economy.

There have also been concerns globally in the industry about the pricing of Chinese steel, and whether it should attract tariffs to balance what is seen as unfair competition. Chinese steel receives subsidies from the Chinese government, after all.

While this may be a valid concern, it also forces governments to make choices about what they see as “strategic industries”. A good example of this is the desire to protect steel jobs in richer countries, in contrast to the willingness to import cheap clothes from Asia in order to keep inflation down.

This is typically why, if tariffs are used at all, they tend to be targeted to certain industries.

The wrinkle in Trump’s plan

So will the US tariffs plan work? Unfortunately for Trump, the answer is probably not. This type of trade policy has been tried, but has seldom been shown to be effective.

The second point is whether the president of a large global power should be concerned about its trade balance with another country. Unless he believes that the country is engaging in large-scale subsidy in order to dump goods on foreign markets, the answer is almost certainly no.

Casual inspection of trade statistics for the US and Canada suggests that the most common exports from Canada to the US include crude petroleum, petroleum gas, refined petroleum and motor vehicle parts and accessories.

Tariffs on the first three will simply push prices up for US consumers. The last one demonstrates, often to the frustration of policymakers who seek to intervene on trade, that there is little that governments can do to influence modern supply chains, unless they seek to break them all together.

Firms will locate activities based on combinations of efficiency and where their customers are. So seeking to change these patterns through tariffs will simply increase the cost of imported inputs and make production in the US less competitive.

In simple terms, complaining that you have a trade deficit with one country is like complaining that you have a trade deficit with your corner shop. They sell you things, you give them money, but they never buy from you. They provide goods that you want for money that you earn elsewhere.

You could shop elsewhere (and have a deficit with the new shop), you can give up your job and even grow your own food. But were you to impose a “tariff” on your corner shop, it would simply put up the prices that you have to pay.

That the US has a trade deficit is not a sign that the rest of the world is “ripping it off”. It is a reflection of an affluent society with relatively high wages buying products from countries that can produce them more cheaply. Trump’s tariffs will hurt Americans first – basic international economics is clear on that too.

“A PhD in Econ from Harvard is a bad thing, not a good thing,” Elon Musk said of Peter Navarro’s academic qualifications.

“A PhD in Econ from Harvard is a bad thing, not a good thing,” Elon Musk said of Peter Navarro’s academic qualifications. Andrew Harnik via Getty Images

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Elon Musk, one of President Donald Trump’s biggest supporters, has been locking horns with Trump’s top trade advisor, Peter Navarro.

“A PhD in Econ from Harvard is a bad thing, not a good thing,” the Tesla and SpaceX CEO said of Navarro’s academic qualifications in an X post on Saturday.

“Results in the ego/brains>>1 problem,” Musk added.

Related video What we learned from the Tesla ‘company update’

Navarro earned his bachelor’s from Tufts University. He then went to Harvard, where he did a master’s in public administration and a doctorate in economics.

Musk criticized Navarro on X days after Trump imposed reciprocal tariffs on more than 180 countries. On Wednesday, Trump said the tariffs, which start at a baseline rate of 10%, would help “make America wealthy again” by bringing manufacturing back to the US.

Navarro, Trump’s senior advisor for trade and manufacturing, has taken a pro-tariff position.

Navarro responded to Musk’s broadside during a Sunday interview on Fox News’ “Sunday Morning Futures.”

“Look, Elon, when he’s in his DOGE lane, he’s great. But we understand what’s going on here. We just have to understand. Elon sells cars,” Navarro said, referencing Musk’s work with the White House DOGE office.

“And he’s simply protecting his own interests as any businessperson would do. We are more concerned about Detroit building Cadillacs with American engines, and that’s what this is all about,” he said.

But Navarro added that things were “fine” with him and Musk and that “there’s no rift here.”

Before joining the first Trump administration in 2017, Navarro was a business school professor at the University of California, Irvine. The 75-year-old is one of the few officials Trump brought back to serve in his second term.

The beef between two of Trump’s most high-profile advisors escalated on Monday.

“He’s not a car manufacturer. He’s a car assembler in many cases,” Navarro said of Musk in an interview with CNBC, adding that Tesla sources car parts from countries outside the US.

Navarro’s comments came after Musk posted a video of the legendary economist Milton Friedman discussing the importance of free markets in an apparent criticism of the US tariffs.

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Musk breaks with Trumpworld on trade and tariffs

Musk has taken a differing view on free trade and tariffs from Trump and his deputies.

The sweeping tariffs, announced on what Trump called “Liberation Day,” have spooked investors and triggered a huge sell-off in the stock market. The S&P 500 is down nearly 14% year to date, while the Nasdaq Composite is down 19% year to date.

Musk said on Saturday, while attending a meeting with Italy’s League party, that he would like to see a “zero-tariff situation” and a “free trade zone” between Europe and the US. Musk said he had also advised the president on allowing more immigration between Europe and the US.

“If people wish to work in Europe or wish to work in North America, they should be allowed to do so, in my view,” Musk said.

Musk, a major Trump backer, now spearheads cost-cutting efforts with DOGE.

And it seems Trumpworld is keen to have him remain in the president’s orbit.

On Thursday, Vice President JD Vance said in an interview with Fox News’ “Fox and Friends” that Musk would stay an advisor even after completing his work with DOGE.

Trump told reporters on Thursday that he expected Musk to leave his administration “in a few months” but added that he wanted Musk to stay on for “as long as possible.”

The White House said in February that Musk was working for the administration as a “special government employee.” Special government employees cannot work for more than 130 days in a 365-day period, according to federal law.

“Elon Musk and President Trump have both publicly stated that Elon will depart from public service as a special government employee when his incredible work at DOGE is complete,” the White House press secretary, Karoline Leavitt, wrote in an X post on Wednesday.

Musk and the White House didn’t respond to requests for comment from Business Insider.

[SINGAPORE] Analysts have downgraded their outlook on Singapore banks amid concerns of weaker loan growth and higher credit costs, as US President Donald Trump’s tariffs threaten a global trade war.

UOB Kay Hian (UOBKH) downgraded DBS to “sell”, cutting its target price from S$49.80 to S$40. The brokerage maintained a “hold” rating for OCBC, cutting its target price from S$21.10 to S$16.85.

Similarly, DBS Group Research analysts downgraded UOB from “buy” to “hold”, while maintaining their “hold” rating on OCBC. UOB’s target price was slashed from S$38.50 to S$32.70, while OCBC’s target price was cut from S$17.60 to S$14.40.

At 2.45 pm on Tuesday (Apr 8), , and were trading at S$38.34, S$15.01 and S$32.35, respectively.

In a note on Monday, UOBKH analyst Jonathan Koh said that banks’ regional operations would bear the brunt of Trump’s reciprocal tariffs, with substantial tariffs imposed across the board on Asian economies including Vietnam (46 per cent), Thailand (36 per cent), China (34 per cent) and Indonesia (32 per cent).

Although Singapore is subject only to a 10 per cent baseline tariff, Koh estimates that DBS, OCBC and UOB would effectively face average reciprocal tariffs of 15.9 per cent, 17.3 per cent and 17.3 per cent, respectively, due to their exposure across the region.

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The brokerage cut its 2026 net profit forecasts for both DBS and OCBC by 13 per cent, citing lower loan growth and higher credit costs due to non-performing loans in the manufacturing sector, particularly within the Asean region.

“The slowdown in intra-regional trade triggered by reciprocal tariffs will reverberate across supply chains across the region,” said the analyst. “Many companies’ China+1 strategies are in tatters.”

He added that manufacturers are likely to cut costs to stay viable, triggering job losses and subsequent slowdowns in domestic consumption.

UOBKH lowered its forecasts for DBS’ loan growth from 4.8 per cent to 2 per cent, while OCBC’s was lowered from 4.9 per cent to 2 per cent.

Both banks’ ability to sustain dividend payouts may also be under pressure. UOBKH said that it expects DBS to maintain a dividend per share (DPS) of S$0.60 in the fourth quarter of 2025 – lower than its previous forecast of S$0.66, while OCBC’s DPS is projected to remain steady at S$1, provided economic conditions do not deteriorate further.

Similarly, DBS Research Group analysts Derek Tan and Lim Rui Wen noted “rough seas ahead” for Singapore banks in a note on Monday. They believe their previous bullish views of the lenders due to more active capital management plans, higher earnings visibility and stronger loan growth have been “derailed” by the prospect of a trade war.

Current banking stock valuations have neared all-time highs at 1.2 to 1.8 times forward price-to-book ratios (based on FY2025 forecasts), the analysts noted.

This draws similarities to the US-China trade war in 2018 which saw local bank stock prices retreat by up to 35 per cent. In FY2018, valuations peaked at 1.3 to 1.5 times forward price-to-book ratios.

“A more pronounced sell-off may be on the cards,” the DBS analysts said.

UOBKH said that global economies and banks should expect further shocks. China’s retaliation to match US tariffs of 34 per cent, as well as the European Union’s warnings of retaliation, could lead to a global trade war.

UOB economists have cut US gross domestic product forecasts from 1.8 per cent to 1 per cent in 2025, while raising the probability of a US recession to 40 per cent from a previous 20 to 25 per cent. Singapore’s GDP growth forecast of 2.5 per cent is likely to fall by 0.5 to 1 per cent, UOBKH’s Koh added.

In Singapore, Prime Minister Lawrence Wong said on Tuesday that the country’s economic growth will be “significantly impacted” by the tariff fallout, and a recession this year cannot be ruled out.

UOBKH noted that the interest rate outlook remains uncertain, with the US Federal Reserve holding off on rate cuts while awaiting greater clarity. The Fed held its 2025 year-end rate projection steady at 3.9 per cent during its Federal Open Market Committee meeting on Mar 25, signalling two modest cuts of 25 basis points each this year.

DBS’ Lim and Tan, however, flagged that the Fed might further increase the current guidance due to the risk of an escalating trade war. “Almost 100 basis points of cuts are now priced (by markets) for 2025, as it is assumed that the Fed will prioritise growth over inflation concerns,” they said, expecting further downside to banks’ net interest income.

Meanwhile, UOBKH’s Koh noted that Singapore’s interest rates have begun to ease. The three-month compounded Singapore Overnight Rate Average fell by 64 basis points in 2024 to 3.07 per cent, and declined further to 2.56 per cent in the first quarter of 2025.

UOBKH also downgraded the broader Singapore banking sector to “underweight”, with Trump’s “unprecedented” tariffs and a slowdown in global trade likely to affect Singapore’s wider economy. Likewise, DBS noted that loan growth guidance from local banks would have to be revised downwards as economic slowdowns intensified.

The DBS analysts noted, however, that Singapore banks have significant management overlays, ranging from S$600 million to S$2 billion.

Even in the face of a prolonged trade war, these should enable banks to keep credit costs low in case of defaults, they said.

What tariffs have been implemented by the Trump administration?

Adão: This is probably the most difficult question, because the answer changes nearly every day. Even though tariffs may not be in place, just the fact that they’re being talked about extensively in the media and by the administration has an impact on the economy.

The uncertainty and the possibility of those tariffs coming have already generated responses by consumers and producers. For example, the media recently reported that most of the car makers outside the U.S. are trying to import lots of vehicles now before any tariffs come into effect in early April.

Durlauf: We have had tariffs threatened, tariffs imposed, tariffs delayed. This creates uncertainties that have distinct harms on the American economy. One standard measure, the Economic Policy Uncertainty Index, has unsurprisingly skyrocketed.

Could Trump’s tariffs be good for U.S. workers and businesses?

Durlauf: Part of the argument for tariffs is that they are good for U.S. jobs, with the employment effect being worth the higher prices and harm to consumers. But that’s not really how they work. In fact, tariffs are likely to cause negative employment effects because of the way that they ripple through the economy.

A good example is the steel tariffs implemented in the first Trump administration. These slightly raised employment in the steel industry. However, they caused an overall decline of manufacturing employment that was an order of magnitude higher than the modest gain in steel jobs. Why? Millions of manufacturing jobs involve products that use steel as an input; over two million jobs are in steel-intensive industries. These jobs are adversely impacted by rising production costs caused by tariffs on steel. In contrast, there are fewer than 150,000 U.S. steelworkers.

U.S. tariff increases do not occur in a vacuum. China has already retaliated. Canada and Mexico previously proposed countermeasures to U.S. threats. The Canada and European Union have just responded to steel and aluminum tariffs. This is why tariffs are often called a “beggar thy neighbor” policy. Everyone will be worse off.

Are there historical precedents for similar tariffs, and what were the outcomes in those cases?

Gulotty: Tariffs have been part of U.S. trade policy since the founding, but in the period that tariffs were high, they were consistent and targeted. There is little historical precedent for this sort of rapid experimentation in tariff-setting, where tariffs are declared one day and dropped the next, or applied to all products from a country.

One analogy would be the 1807 Embargo Act—a ban on all trade intended to punish Britain and France. It had the effect of sharply reducing American imports and exports, allowed British trade expansion in South America and escalated political tensions, culminating in the War of 1812.

How are Trump’s tariffs, or threats of tariffs, affecting relationships with U.S. neighbors and trade partners?

Adão: Any negative impact that you would expect from the tariffs being applied to other countries, especially those in Asia, would be much larger if they are applied to your direct neighbors. Not only is there more trade with our close partners, but that trade may be on specific items that are very hard to substitute because they are integrated into these very long supply chains.

The car manufacturing industry is a good example. If you cut Canada from the supply chain in the U.S., you’ll have fewer parts for producing cars. Even the parts that were produced in the U.S. are not going to be useful because you don’t have the parts that are being produced in Canada. It’s not easy for firms to substitute, for example, part of an engine that is only used by Ford on certain models; it will take a few months at least. The evidence that we have is that in the short run, those disruptions can be very severe.

Gulotty: Tariffs reduce demand for foreign goods, which can create political challenges in maintaining friendly relations with the U.S. However, those issues are part of everyday economic relations among even close partners.

In the 20th century, the U.S. developed a system to address those tensions in a constrained way, including institutions like the World Trade Organization and its dispute settlement systems. Under the past several administrations, the U.S. has abandoned that system. Now Trump’s tariffs are being done in a way that ignores prior treaty commitments, combined with hostile rhetoric about national security and a seeming drive toward imperialism.

Decades of diplomatic effort to negotiate these treaties, build trust and develop a system to address economic frictions have been abandoned.

—The story contains material previously published by the Harris School of Public Policy.

Many people have a lot riding on their investments. It arguably provides the best chance to achieve long-term financial goals, whether generating enough money to retire, giving children or grandchildren a big helping hand as they begin their adult life, or something else entirely.

With so much money at stake, it’s crucial to have a plan. Selecting the right investments is important, but there’s more to it than that. You should also craft a set of guiding principles and learn about how financial markets work. Doing so can reduce the risk of making mistakes in the heat of the moment and maximize your returns.

This article looks at 10 key rules for making the most of your investments.

Key Takeaways Knowing how markets work and having a plan makes dealing with volatility and bear markets easier.

Impulse buying and selling often ends badly.

The more you plan ahead, the better prepared you’ll be to make the right calls under pressure.

Don’t just follow the crowd. Do your research and aim to buy low and sell high.

Buying for the long term and standing by your convictions is generally the best strategy.

Rule 1: Understand Market Cycles

Asset prices generally rise, fall, then rise again. And it’s not all random. These phases of expansion and contraction form part of a cycle that regularly repeats itself.

In good times, companies invest, consumers spend, banks lend money at reasonable rates, and most stocks rise in value. The good times don’t last forever (indeed, a sign that it’s coming to an end is seeing some claiming they never will.) Eventually, costs rise too much and investments fetch more than their historical norms. At this point, a “correction” begins as the economy weakens and investors retreat, paving the way for the cycle to repeat again.

The key takeaway from this is not to panic when prices start dropping. Over time, the stock market should continue its upward trajectory—historically, it always has, but that’s cold comfort in the moment.

Rule 2: Avoid Emotional Investing

One of the main reasons investors are advised to establish guidelines before investing is to reduce the chance of emotions getting the better of them. When investors log in to their accounts during bouts of volatility, they tend to be impulsive, buying more of the winners and dumping the losers. Often that turns out to be a mistake.

“The worst investment decisions are those driven by fear or greed,” said Alex Campbell, head of communications at U.K.-based financial technology company FreeTrade. “Take some time to consider the drop in light of your investment strategy and reflect on the move that you feel is right based on the available information.”

Rule 3: Sometimes It Pays To Be a Contrarian

“Buying low and selling high” means being a contrarian—buying or selling when others are not. It requires a lot more research on your part. It’s not just a case of buying everything out of favor. The market is generally right and most stocks are cheap for a reason.

To be successful, you’ll need to scrutinize the data, be a critical thinker, and not get distracted by what others say. A good starting point is learning to recognize overcorrections. For example, investors can sometimes excessively punish the entire market when the economy is stuttering or oversell specific stocks because of adverse temporary factors.

Asked what he tells newer investors, Yvan Byeajee, author of Trading Composure: Mastering Your Mind for Trading Success, was succinct: “Cultivate a deep embrace of uncertainty.” He added, “It’s not enough to acknowledge uncertainty or risk intellectually; you need to accept it emotionally and allow them to guide your decision-making without fear or resistance.”

Rule 4: Know When To Exit

Normally, a long-term buy-and-hold strategy is considered the best way to go. However, sometimes it’s necessary to walk away earlier than planned. Byeajee said too many investors approach some investments like the lottery.

“This mindset can be disastrous, leading to behaviors like chasing trends, panic selling, or overleveraging—all of which will likely wipe out gains and erode confidence,” he said. “Sustainable investing is about playing the long game, respecting the process, and allowing compounding to work its magic over time.”

To avoid making mistakes, it’s sensible to draw up an exit strategy at the onset before the investments are made. Common methods include setting price targets, loss limits, and time frames for your investment. You should also consider triggering events that could make you lose confidence and that your risk tolerance could change over time.

Rule 5: Diversify Your Portfolio

Investors are regularly advised to spread their money across numerous investments. “For most people in most situations, a long-term, buy-and-hold, diversified, low-cost investment approach is likely more suitable than active trading,” said David Tenerelli, a certified financial planner at Values Added Financial Planning in Plano, Texas. “This is because it helps the investor ignore the ‘noise’ and instead focus on a disciplined approach.”

The logic behind diversification is that different assets will react differently to the same events. In theory, that means if one investment does badly, its impact will be limited as the other assets in the portfolio should perform better.

Rule 6: Follow Broader Market Indicators

Stock market indexes track the performance of a selection of publicly traded companies and so function as a barometer of segments of the stock market. There are a variety of indexes to keep tabs on. Some focus on specific sectors or the country’s biggest companies by market cap. For a representation of the entire U.S. stock market, a good place to look is the Wilshire 5000 or Russell 3000.

Rule 7: Recognize Bear Market Patterns

Bear markets—when there’s a steep drop in asset prices—are less scary when you understand how they work.

These periods of prolonged price declines are usually broken down into four distinct phases, which SteelPeak Wealth, a Los Angeles-based wealth management firm, describes as follows:

Recognition. Prices start fluctuating yet most investors shrug it off as normal ups and downs. Eventually, they begin to realize a bear market is impending and stop buying on the dips. Panic. Prices plummet, the media reports doom and gloom, and investors panic sell. Stabilization. Stocks halt their decline but the outlook remains grim and any rally triggered by optimists is usually knocked back. Anticipation. The recovery begins.

Tip Timing the market is extremely difficult. For most investors, the best way to behave during bear markets is to not panic, focus on the long term, and take advantage of dollar cost averaging.

Rule 8: Be Skeptical of Forecasts

The internet is littered with predictions from so-called gurus. You’re best off ignoring them. A study from the CXO Advisory Group found that their accuracy was, on average, just under 47%. That’s worse than flipping a coin.

“Market forecasts should be ignored, regardless of whom they come from—professional economists or market gurus,” wrote Larry Swedroe, a consultant and outsourced chief investment officer, in response to that report. “Instead, investors are best served by having a well-thought-out plan, including rebalancing targets, and sticking to that plan.”

Rule 9: Prepare for Market Volatility

Market volatility is scary. Seeing your holdings are shedding value could make you want to dash for the exit and ignore your well-thought-out convictions. That’s the last thing you should do. Remember, markets go through ups and downs but generally rise in value over the long run.

Rule 10: Enjoy Bull Markets, Prepare for Bear Markets

Markets and prices move up and down. When they are rising, it can be tempting to be overconfident and throw more money at the winners. And when they plummet, you might want to do the opposite and dump everything, especially the laggards. Knowledge of how markets work will hopefully prevent you from panicking or being greedy.

If anything, you want to buy when assets you are convinced about are out of favor and sell when everyone is raving about them. Or better yet, do nothing and stick to your strategy. It’s time in the market rather than timing the market that often generates the best returns.

The Bottom Line

There are no guarantees of success in investing. However, if you understand market cycles and how indexes and bear markets work, avoid impulse buying or selling, adopt a contrarian mindset, draft an exit strategy, and maintain a diversified portfolio, you’ll have a much better chance of coming out on top.

“To succeed, traders and investors must trust the process even when the outcomes are temporarily unfavorable,” Byeajee said. “This mindset shift isn’t just important; it’s foundational. It’s the difference between reacting emotionally and acting strategically—not once or twice, but consistently.”