‘GOP spines stay jelly’: Even Elon Musk’s AI knows the score on Trump’s tariffs | Opinion
The markets — Dow, S&P and NASDAQ — are all down this morning after a day of down markets in Europe and Asia. Trump advisers say 50 countries have lined up to negotiate better trade deals. To get a little perspective on the stock market’s correction as well as potential economic and political fallout, I turned to Elon Musk’s X AI, named Grok 3 beta. I was looking for answers from a cutting-edge intelligence that weren’t necessarily hostile to the Trump administration. Here’s what I got. (The answers are edited for length and style and its assertions have been checked for AI hallucinations.)
Who is to blame?
MASTIO: Who is to blame for the market correction that came after Trump’s global tariffs were announced?
GROK: The announcement of sweeping tariffs by President Trump on April 2, 2025, introduced a 10% baseline tariff on all U.S. imports, with higher rates — up to 54% on countries like China — triggering immediate market reactions. The S&P 500 dropped nearly 5% on April 3, its worst day since June 2020, and lost $5 trillion in value over two days, marking a record decline. Global markets followed suit, with Japan’s Nikkei 225 falling 2.8%, European stocks nearing correction territory, and a broad sell-off reflecting investor fears of a trade war and economic downturn.
Economists and market analysts, such as those from JP Morgan (raising recession odds to 60%) and Federal Reserve Chair Jerome Powell (noting “larger than expected” fallout), linked the tariffs directly to heightened uncertainty, higher inflation risks, and slower growth prospects.
Trump’s administration, including Commerce Secretary Howard Lutnick and trade advisor Peter Navarro, framed the tariffs as a necessary reordering of global trade to protect American interests, arguing that short-term market volatility would yield long-term gains like job creation and manufacturing resurgence.
Trump himself dismissed the market drop, predicting a future boom. However, critics — including economists like Mark Zandi of Moody’s Analytics and global leaders like Ursula von der Leyen of the European Commission — pointed to the tariffs as the primary catalyst for the correction, warning of higher consumer prices and retaliatory measures from countries like China (imposing 34% levies on U.S. goods) and Canada (25% on U.S. vehicles).
These retaliations amplified the economic shock, further unsettling investors.
On the other hand, some argue that markets were already vulnerable. The S&P 500 had been sliding for weeks prior, down over 12% from its February high by April 3, suggesting broader concerns — possibly elevated valuations or anticipation of policy shifts — were at play.
Investors may have underpriced tariff risks earlier, as Deutsche Bank’s Jim Reid noted, leading to a “severe shock” when the policy materialized. Still, the timing and scale of the sell-off align closely with the tariff announcement, making it the most immediate trigger.
Public sentiment on platforms like X reflects this divide: some users directly blame Trump’s tariffs for “engineering” the crash, citing their volatility, while others might imply broader systemic issues or political opponents, though such claims lack substantiation in the data. Economists generally agree that tariffs, by disrupting supply chains and raising costs, bear significant responsibility, but the extent of the correction also depends on how markets adjust to ongoing uncertainty and potential policy reversals.
In short, Trump’s tariff policy is the most proximate cause of the market correction, driven by its sudden implementation and global repercussions. However, pre-existing market conditions and the actions of retaliating nations share some of the burden. As an AI, I can’t assign moral “blame,” but the evidence points to the tariffs as the key spark, with their architect, Trump, and his administration at the center of the economic disruption.
Small investor tips
MASTIO: What should small investors do about the market crash?
GROK: For small investors navigating the market correction following Trump’s global tariff announcement on April 2, 2025, the key is to stay calm, assess your situation, and act strategically rather than reactively.
First, don’t panic-sell. The S&P 500’s nearly 5% drop on April 3 and the subsequent $5 trillion loss over two days reflect a sharp, fear-driven reaction to tariff uncertainty. Historically, markets often overreact to policy shocks before stabilizing — think of the 2018 trade war fears that eventually leveled off. Selling now locks in losses and misses potential recovery. Data from past corrections shows that holding through volatility) often beats trying to time the bottom.
Next, review your portfolio. Check your exposure to sectors hit hardest by tariffs — manufacturing, tech, and consumer goods reliant on global supply chains (e.g., autos down 8% in a day). If you’re heavily weighted there, consider rebalancing, but don’t overhaul everything. Diversify into less tariff-sensitive areas like utilities or healthcare, which tend to weather trade disputes better. Cash or short-term bonds can also act as a buffer if you’re risk-averse, especially with JP Morgan pegging recession odds at 60%.
Look for opportunities. Crashes create bargains. Stocks like those in export-heavy industries (e.g., Boeing or Caterpillar) may be oversold if the market’s panic exceeds fundamentals. If you’ve got cash on hand, dollar-cost averaging into quality companies — ones with strong balance sheets and domestic focus — could pay off when volatility eases. Trump’s team claims tariffs will boost U.S. manufacturing long-term; if they’re right, small-cap industrials might rebound.
Stay informed, not obsessed. The tariff fallout is fluid — China’s 34% retaliatory levies and Canada’s 25% on U.S. vehicles signal a brewing trade war, but negotiations or rollbacks could shift sentiment fast. Track credible sources (e.g., Federal Reserve statements or trade policy updates), not just X hype.
Finally, match your moves to your goals. If you’re young with a 20-year horizon, this dip’s a blip — ride it out. If you’re near retirement, prioritize capital preservation over chasing recovery. Most small investors lose by overreacting; the S&P’s long-term average return (around 10% annually) holds despite corrections like this.
The art of the deal
MASTIO: That’s good advice. As you mentioned, how quickly will Trump make deals with other countries to mutually ease tariffs or otherwise back away from his policy?
GROK: Predicting how quickly Donald Trump will strike deals with other countries to ease tariffs or scale back his policy is tricky — there’s no crystal ball here, and it hinges on a mix of his strategy, global reactions, and economic pressures as of April 6, 2025. That said, we can piece together a reasonable timeline based on the current situation and his past behavior.
Within days (of the tariff rollout), Canada and Mexico were engaging, India was pushing to cut its tariffs, South Korea called emergency talks, and Japan sought dialogue. This aligns with Trump’s playbook from his first term: threaten big, then deal. In 2018, he slapped steel tariffs on Canada and Mexico, only to lift them within a year after renegotiating the USMCA.
Speed depends on his leverage and others’ willingness to bend. The market’s reaction — $5 trillion wiped out in two days, S&P 500 down nearly 5% on April 3 — puts pressure on him to show wins fast.
Allies like Canada (facing 25% on vehicles) and the EU (prepping countermeasures) have incentives to talk, especially if Trump dangles exemptions. India, with a 12% average tariff (not the 52% Trump claims), might move fast to protect its $130 billion in U.S. trade. South Korea, hit at 24%, could pivot too, given its auto exports.
China’s a wild card. With 54% tariffs (34% new, plus 20% prior), it’s retaliating hard — 34% on U.S. goods starting April 10, plus rare earth curbs. Trump’s hinted at openness to “phenomenal” offers, but Beijing’s stance is dug-in, suggesting a longer standoff. Vietnam (46%) and Thailand (36%) might deal quicker, lacking China’s clout.
Historical precedent says weeks to months. The 2018 Canada-Mexico deal took about a year, but this time, Trump’s team — Lutnick, Navarro, Bessent — seems prepped for rapid talks. Posts on X and reports from late March show White House advisors negotiating pre-April 2, scaling back sectoral tariffs (cars, chips) to focus on reciprocal ones. If that pace holds, initial deals could emerge by May or June 2025, especially with smaller players. Big fish like the EU or China might drag into late summer or fall, assuming no escalation derails things
Economic fallout could accelerate this. If inflation spikes (core possibly hitting 3%+ per Wall Street) or recession odds climb (JP Morgan’s 60%), Trump might pivot to claim victories — rebates from the $6 trillion revenue he’s eyeing could be a bargaining chip. But if he doubles down, as he did with China in 2019, it could stretch into 2026.
Global recession likely?
MASTIO: How likely is a global recession spurred by the tariffs and foreign countermeasures?
GROK: The numbers suggest serious risk. Fitch Ratings pegs the U.S. effective tariff rate at 22% — a level unseen since 1910 — projecting a GDP hit of up to 1.5% if sustained. Bloomberg Economics warns U.S. GDP could shrink 4% with widespread retaliation, while Oxford Economics forecasts global growth dipping to 1.4% — near 2008 crisis lows. JP Morgan’s upped its global recession odds to 60% by year-end, citing disrupted supply chains and sliding business confidence.
UBS and Deutsche Bank echo this, estimating a 1-2% inflation spike and a 1-1.5% GDP drop, pushing recession risks “materially higher.” The Tax Foundation adds that U.S. imports could fall 25% ($900 billion), hammering export-dependent economies like Germany and China.
Counter-levies amplify the damage. China’s rare earth restrictions and Canada’s auto tariffs threaten U.S. manufacturers, while the EU’s planned duties could spark a tit-for-tat spiral. If U.S. exports — $2.1 trillion in goods last year — drop 46% as some fear, per X posts, the feedback loop could tank global demand. Developing nations like Vietnam (46% tariffs) and Bangladesh (37%) face outsized pain, potentially destabilizing emerging markets.
Variables matter. Sustained tariffs plus retaliation could tip the scales — JP Morgan’s 60% odds feel plausible if trade war escalates. A Federal Reserve rate cut (three projected by Goldman Sachs) might cushion the U.S., but not export-heavy peers. Consumer confidence could crater further, slashing the two-thirds of U.S. GDP tied to spending. Stagflation’s also on the table — UBS sees inflation nearing 5% — complicating recovery.
Likelihood? Call it 50-60% for a global recession by late 2025 if tariffs and counter-levies harden. That’s not certainty — Trump could blink, or markets could adapt — but the ingredients (trade disruption, inflation, confidence shocks) are simmering. Watch May-July: if deals don’t materialize, the odds climb.
Reversing tariffs
MASTIO: Will Republicans in congress grow a spine and reverse the tariffs themselves as they have the right to do?
GROK: Congress absolutely has the power to reverse tariffs. The Constitution (Article I, Section 8) gives it authority over trade and taxation, including tariffs, which Trump’s team has leveraged via executive powers like the Trade Expansion Act of 1962 and the National Emergencies Act. The sweeping tariffs announced April 2 sparked a market crash and global backlash, yet GOP lawmakers have mostly stayed in lockstep with Trump. Why? Loyalty, fear of his base, and a bet that short-term pain yields long-term leverage.
Signs of pushback exist but are limited. On April 2, four Senate Republicans — Rand Paul, Mitch McConnell, Susan Collins, and Lisa Murkowski — joined Democrats to pass a 51-48 resolution blocking Trump’s Canada tariffs (25% on vehicles). It’s symbolic, though — the GOP-controlled House won’t touch it, and even if they did, overriding Trump’s inevitable veto needs two-thirds in both chambers (67 Senators, 290 House members). Right now, the Senate has 53 Republicans, 47 Democrats; the House has 221 Republicans, 214 Democrats after recent specials. You’d need 14 GOP Senators and 69 House Republicans to flip — tough math when only a handful (like Chuck Grassley with his Trade Review Act) show real unease.
The Grassley-Cantwell bill, introduced April 3, aims to claw back tariff power, requiring congressional approval within 60 days or tariffs lapse. It’s gained co-sponsors (Moran, Tillis, McConnell), but it’s a long shot — House Speaker Mike Johnson’s team spiked similar moves in March, rigging rules to shield Trump’s emergency declarations. Most Republicans, like John Barrasso, still cheer tariffs as a fentanyl fix or trade rebalance, despite economists warning of recession risks.
Will they reverse course? Not soon. The base loves Trump’s “America First” swagger — posts on X show diehards dismissing market dips as “fear porn.” Midterms are 18 months out; economic pain (say, inflation hitting 3%+ or mass layoffs) might shift sentiment, but for now, GOP spines stay jelly. A few (Paul, Bacon) might push, but the party’s too tethered to Trump’s veto and voter clout. Expect deals with allies like Canada (maybe May-June) before Congress grows bold — unless markets tank harder or constituents revolt. Data’s early, but history (2018’s muted tariff fights) suggests they’ll ride this out first.
This story was originally published April 7, 2025 at 9:05 AM with the headline "‘GOP spines stay jelly’: Even Elon Musk’s AI knows the score on Trump’s tariffs | Opinion."
