Tariffs: Peace Rally Puts Damage Thesis on Trial
Updated April 17: Three consecutive data points have now dismantled the tariff-damage thesis. PPI printed 0.5% on April 14 against a 1.1% estimate. Empire State Manufacturing surged to +11.0 on April 15 against a -0.5 estimate. And on April 17, the Israel-Hezbollah ceasefire plus Iran's Hormuz reopening triggered a broad-based risk-on rally — SPY +1.33% to $711, Dow +2.15%, Russell 2000 +2.60%, VIX to 17.47. A tariff regime that was supposed to compress margins, shock inflation, and trigger recession has produced none of those things. The S&P 500 is now pressing fresh 52-week highs with the equity market's strongest breadth reading since February. Bank of America and Morgan Stanley both beat Q1 earnings. Consumer credit stress is absent from the data. PepsiCo beat estimates as price cuts on Doritos and Lay's won back shoppers. The tariff transmission channels — margin compression, price pass-through, capex reduction — are not firing the way the bear case required. The next test is the earnings mega-batch. TSLA reports April 22, IBM and NOW April 22, INTC April 23. The week after delivers MSFT, META, and GOOGL on April 29, then AAPL and LLY on April 30. If corporates confirm the soft data with soft results, the tariff damage thesis needs replacing with something different.