Instead of immediately passing tariff costs to consumers, US corporations are initially absorbing the shock. They are mitigating the impact by reducing labor costs and accepting lower profitability, which explains the lag between tariff implementation and broad consumer inflation.

A surge in IPOs and M&A isn't driven by pro-business policies, but by a reduction in policy uncertainty. With a clearer, albeit more interventionist, landscape, companies have the confidence to execute major strategic plans they had previously postponed.

The inflation market's reaction to tariff news has fundamentally shifted. Unlike in the past, recent tariff threats failed to raise front-end inflation expectations. This indicates investors are now more concerned about the negative impact on economic growth and labor markets than the direct pass-through to consumer prices.

The dominant market driver will transition from macro risks like tariffs and policy uncertainty to micro, asset-specific stories. The key focus will be on company-level analysis of AI capital expenditure plans and their impact on earnings.

While tariffs were a dominant market concern previously, they have fallen in priority for investors. The primary focus has shifted to more systemic risks, including the potential for fiscal dominance over the Federal Reserve and the long-term trend of "de-dollarization" among global institutions.

Because U.S. tariff levels are likely to remain stable regardless of legal challenges, the more critical factor for the long-term outlook is how companies adapt. Investors should focus on corporate responses in capital spending and supply chain adjustments rather than the tariff levels themselves.

The inflationary impact of tariffs is appearing slower than economists expected. Companies are hesitating to be the first to raise prices, fearing being publicly called out by politicians and losing customers to competitors who are waiting out the trade policy uncertainty.

The economic impact of tariffs is not an immediate, one-time price adjustment. Instead, Boston Fed President Collins characterizes it as a "long one-off" process where the full effect can take months or even a year to filter through the economy. This prolonged adjustment period extends uncertainty and complicates inflation forecasting.

The traditional relationship where economic performance dictated political outcomes has flipped. Now, political priorities like tariff policies, reshoring, and populist movements are the primary drivers of economic trends, creating a more unpredictable environment for investors.