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Tariffs vs. AI: A Tale of Two Economies

It is the best of times, it is the worst of times, it is the age of artificial intelligence, it is the age of tariffs. In this, the year two thousand and twenty-five, it sometimes feels like we are living a tale of two economies. One is a roaring bull stock market fueled largely by AI and tech while the other is a slowing economy fueled by tumultuous tariff deals. Contradictions abound as the economic indicators of Main Street fail to shake the value projections on Wall Street. So why is a slowing economy not slowing the stock market, and how might the answer impact your investments?

The Tariff Economy

When the tariff turmoil began with Liberation Day in early April, the stock market reacted with a vehement “no, thank you.” The S&P 500 had its worst day since 2020.1 Concerns about tariffs, even for the stock market, stem from concerns about what they might do to inflation as tariffs tend to raise prices. Tariffs are also feared to lead to layoffs as companies try to cut costs to compensate. Higher unemployment and reduced consumption are signs of a slowing economy.

Since that first announcement, more tariffs have been announced, delayed, rolled back, paused, and implemented. Through it all, the economy has seemingly persisted. For a while, preliminary jobs and unemployment data made the labor market look resilient. But the recent July jobs report and significant downward revisions to the numbers from previous months seems to have corrected the assumption.2

Yet with bad news comes the potential for good, as the poor jobs reports make an interest rate cut more likely, especially if the low jobs numbers continue.2 Wall Street also doesn’t seem to think the impending 15% tariffs will be enough to rock equities or cause a recession.3

The AI Economy

Amidst the tariff turmoil of 2025, the stock market has been bullish this year. The S&P 500 is on track for year-over-year earnings growth of 10.3%, well above the previously anticipated 5%.4 Big Tech and its AI economy are largely driving this upward trend, despite the tariff economy’s signs of a slowdown.

Big Tech hasn’t merely weathered the tariff storm, but has actively pursued the AI arms race as though nothing has changed. The biggest tech companies have announced that AI investments will continue in 2026 to the tune of $364 billion.4 But the effects of the AI boom aren’t limited to the stock market. AI investments drive economic activity like job growth in construction and bolster greater demand for energy and material inputs, theoretically counteracting a slowing Tariff Economy.4 Even more encouraging for bullish investors have been the exemptions from tariffs that several big tech companies like Nvidia and Apple have scored in recent months.3

So while we may be living in two economies, the stock market is not the economy writ large. It is the value and expected future earnings of publicly traded companies, which while related to, are not wholly reflective of economic indicators like consumption, employment, and commerce. The Tariff Economy and the AI Economy remain two separate economies with different impacts on investments. For now, the former is not shocking the latter.

At the same time, it’s impossible to know how they will play out. Instead of agonizing over this tale of two economies, you can hedge both sides with portfolio accessories from TrueShares. TrueShares Quarterly Bull and Bear Hedge ETFs aim to consistently navigate bull and bear market conditions, with the potential to deliver positive total returns during high volatility. By adding QBUL and QBER as accessories to your portfolio, you have the potential to be right about tariffs and AI, even when you’re wrong about both.

  1. https://www.nytimes.com/live/2025/04/04/business/trump-tariffs-stocks-economy 
  2. https://finance.yahoo.com/news/the-dominant-economic-narrative-has-been-revised-chart-of-the-week-095917309.html 
  3. https://finance.yahoo.com/news/stock-market-pullbacks-will-be-short-lived-wall-street-sees-ai-rate-cut-optimism-fueling-rally-133057446.html
  4. https://finance.yahoo.com/news/one-key-reason-a-slowing-economy-isnt-shaking-stock-market-bulls-100056794.html

For more information and full disclosures, visit https://www.true-shares.com/qbul/ and https://www.true-shares.com/qber/

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