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Howard Marks says Trump tariffs echo Brexit’s fallout, warns of recession risk

Howard Marks says Trump tariffs echo Brexit’s fallout, warns of recession risk

Howard Marks: Howard Marks has warned that President Donald Trump’s aggressive tariff measures could lead to significant economic consequences.

Synopsis
Howard Marks: Goldman Sachs now estimates a 45% chance of a U.S. recession, citing growing concerns over a potential full-scale trade war that has triggered a widespread selloff in equities and Treasuries. On Thursday, the S&P 500 dropped 3.5%, pulling the index about 15% below its February high.
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Veteran investor Howard Marks has cautioned that U.S. President Donald Trump’s push for sweeping tariffs could trigger serious economic fallout, likening the idea to the UK's Brexit decision and warning that such protectionist measures could potentially spark economic dislocation, a recession and a reversal of decades of prosperity.
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In his latest memo “Nobody Knows (Yet Again),” the Oaktree Capital co-founder called Trump’s 10% blanket tariff proposal a potential “own goal” — a self-inflicted policy blunder — and drew a direct comparison to the UK’s departure from the European Union.

"I consider the tariff developments thus far to be what soccer fans call an 'own goal' – a goal scored for the other side when a player accidentally puts the ball into his own team’s net. In this way, they’re highly analogous to Brexit, and we know how that turned out. Brexit cost the British mightily in terms of GDP, morale, and alliances, and it harmed their reputation for governance and stability. All of this damage was self-inflicted," said Marks.

His warning comes as markets reel from a volatile week sparked by escalating trade tensions. Trump's tariff push — including a move to raise duties on Chinese imports to an effective rate of 145% — has drawn swift retaliation from Beijing and sent global investors scrambling.

Goldman Sachs now pegs the probability of a U.S. recession at 45%, as fears of a full-blown trade war have led to a broad selloff in equities and U.S. Treasuries. On Thursday, the S&P 500 fell 3.5%, dragging the index roughly 15% below its February peak. Safe-haven gold hit record highs, while U.S. bond yields posted their sharpest weekly rise in decades.
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While Marks acknowledged the rationale behind Trump’s tariff objectives — including efforts to “support U.S. manufacturing,” “encourage exports,” “discourage imports,” “shrink or eliminate our trade deficit,” “make supply chains more secure through onshoring,” and “deter unfair trade practices aimed at the U.S.” — he questioned whether these goals are truly achievable. As he pointed out, “the U.S. is unlikely to ever buy less from other countries than they buy from us as long as the U.S. is bigger and more prosperous and thus has greater buying power.”

Marks also expressed skepticism about the feasibility of rebuilding American industrial capacity in the short term. “I doubt there is a factory in the U.S. capable of producing flat screens for TVs or computers. It would take years to build enough capacity to satisfy a meaningful percentage of U.S. demand,” he said, noting that even if tariffs successfully incentivize domestic production, the U.S. lacks the infrastructure to absorb it quickly.

He warned that the costs of such protectionist measures may be felt almost immediately, arguing that the push toward aggressive protectionism could “backfire” and damage the economy far more than intended. “The economic consequences could be truly dire,” Marks wrote, especially if tit-for-tat tariffs spiral into a broader trade war that undercuts consumer spending, corporate investment, and global cooperation.

Drawing a parallel to Brexit, Marks suggested the long-term damage from the tariffs could mirror what the UK has endured since leaving the EU — slower growth, diminished investor confidence, and a weakened global standing. While he refrained from forecasting specific outcomes, Marks emphasized the deep uncertainty surrounding policy interventions of this kind. “Truly nobody knows, and a lot of this memo will be about things we can’t know for sure,” he said.

In closing, Marks stressed the complexity of the current environment and the limitations of prediction. “There’s no such thing as foreknowledge here, just complexity and uncertainty, and we must accept that as true.”

Also read | Howard Marks on the future of investing: 6 Key takeaways for investors
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