As noted here on Sunday evening, there’s now begrudging acceptance among market participants and Wall Street strategists that in fact, April 2 isn’t likely to be a risk event “clearing” day.

Midweek, in a Rose Garden ceremony, Donald Trump’s going to announce more tariffs on potentially dozens of countries whose leaders will then begin the maddeningly laborious process of bargaining with an administration which negotiates in bad faith.

There’s no real telling what Trump wants, who he wants it from, when, why or even whether wholesale capitulation to his maximalist position would be sufficient to secure a reprieve. There’s also no guarantee that even if you do secure a reprieve, the White House won’t renege or find some new excuse to go after your trade.

“In our view, the reciprocal tariff announcement on April 2 should offer some incremental clarity on tariff rates and countries/products in scope, but it’s likely a stepping stone for further tariff negotiations as opposed to a clearing event,” Morgan Stanley’s Mike Wilson wrote Monday, as stocks gyrated. “This means policy uncertainty and growth risks are likely to persist — it’s a question of to what degree.”

Yes, “to what degree” will US trade policy remain vexingly erratic? Put differently, are we talking “normal” crazy like “Trump 1.0,” or are we talking Kanye in the Klan suit crazy? I’m leaning towards the latter, and I think Trump probably is too based on the conspicuous lack of anything that even remotely resembles a coherent strategy thus far.

At this point — and I say that as if we’re two years in, as opposed to two months — he’s not giving market participants much of a choice, nor analysts much plausible deniability. This degree of uncertainty’s bad until proven otherwise, and the same’s true of the policies.

Already, the growth-inflation mix has taken a turn for the stagflationary in the US and that’s before the impact of tariffs has a chance to infect the hard data. Goldman, which for two years harbored a sunnier-than-consensus view of the economy, surely didn’t want to turn bearish, but basically had to given Trump’s insistence on a sharply higher average US tariff rate.

There’s the chart. The bank’s Jan Hatzius now expects a 15ppt increase, which simply isn’t something corporates and the economy can shake off.

This situation’s the very definition of “fluid,” which means it doesn’t have to pan out as illustrated. But there’s a sense in which markets and management teams would rather Trump just go with a hardline approach and stick with it, rather than keep everyone guessing and hoping for something less onerous. At a certain point, the ambiguity’s worse than the actual tariffs.

A couple of readers asked about Goldman’s new inflation forecasts, which were in the news Monday alongside headlines touting David Kostin’s decision to cut bank’s year-end S&P target to a Street-low 5700. The figure below shows Hatzius’s new projection for core price growth on the Fed’s preferred metric.

“Every 1ppt increase in the effective tariff rate raises core PCE prices by about 0.1ppt,” the bank reminded investors. “Under our new tariff assumptions, we expect core PCE inflation to rise from 2.8% YoY in February to a peak of about 3.5% this year.” That’s up 0.5ppt from the bank’s previous call.

Try to imagine being the Fed in this scenario. Trump’s going to demand rate cuts. The dollar’s back-footed recently because — and I don’t know a nicer way to put this — the administration’s acting like it wants to suspend the rule of law, but you can expect bouts of dollar strength as the trade war heats up. Trump’s going to insist the Fed blunt that strength, lest currency weakness abroad should offset his tariffs.

But the Fed can’t acquiesce to those demands, first because to do so would be to cede the institution to an autocrat who’s already commandeered Congress and the Supreme Court, but also because cutting rates when core inflation’s biased higher and running — in Goldman’s scenario — 1.5ppt above target, is tantamount to a gross dereliction of duty.

Of course a Fed that’s constrained both by inflation and the imperative of preserving its own independence is a Fed that can’t cut rates to cushion what’s likely to be a meaningful hit to the domestic growth impulse from trade frictions. Goldman sees that drag peaking at 1.3ppt in Q1 of 2026.

Again, Trump’s not giving anyone a choice when it comes to assessing the macro outlook: It’s grim. In the same note, Hatzius raised his subjective recession odds for the US to 35%, the highest in a very, very long time for the bank, as shown below.

Higher recession probabilities “reflect our lower growth baseline, the sharp deterioration in household and business confidence in the outlook over the last month and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies,” Hatzius sighed.

Personally, I think the administration’s bluffing when it comes to a tolerance for pain, whether from lower stock prices, slower growth or, as now, both. The issue, though, is that there’s evidence (e.g., a couple of failed attempts to support equities in the wake of the slapdash Canada-Mexico tariff announcements) to suggest rescuing sentiment won’t be as simple this time as saying “Just kidding.”

Because let’s face it: Trump’s not kidding. About anything. And everyone knows it. As he put it himself over the weekend, when NBC asked if he’s serious about staying in office for a third term, “I’m not joking.”