Druckenmiller on tariffs: Less than 10% is optimal.

The decline in stocks has turned tariffs into a lightning rod, and the debate about their benefits and risks is in full swing. Supporters argue that tariffs will revive American manufacturing, while opponents warn they will trigger inflation and send the U.S. into a recession.

The situation has attracted the attention of many prominent investors, including legendary billionaire and hedge fund manager Stanley Druckenmiller. He became famous for his short bet against the British pound alongside George Soros in 1992 and is one of the most renowned investors in the world. His Duquesne Capital reportedly never had a loss and generated an average annual return of 30% during its nearly 30-year operation.

The stock market decline suggests that, in summary, market participants believe that revenue and profit growth will shrink.

Sales and profitability are at the heart of stock market returns, and expectations for increases in both contributed to a 24% return for the S&P 500 in 2024. At the beginning of the year, most Wall Street analysts, including powerful players like Goldman Sachs, predicted further profits, partly due to hopes for an economy that would continue to reward corporate financial results.

However, some warning signs are starting to appear, and these red flags have come to the forefront following the proposed tariffs by Trump, which include a global customs fee of 10% on imports, as well as tariffs reaching up to 54% on imports from China.

In January, Druckenmiller suggested that tariffs are the lesser of two evils. He pointed out that neither Republicans nor Democrats have made the tough choices necessary to reduce the deficit, leaving the government with a significant need for additional revenue.

The legendary fund manager sent a short and direct message with 9 words regarding the stock market decline. He said that of the two options for generating revenue for the U.S. government, tariffs are preferred over income taxes. He argued that tariffs should be viewed as a consumption tax.

“I do not support tariffs exceeding 10%,” wrote Druckenmiller.

The current base tariff on imports is 10%. However, tariffs are significantly higher on many important trading partners. For example, besides the 54% tariffs on imports from China, tariffs are 25% on imports from Canada and Mexico, and 46% on imports from Vietnam. Tariffs on the European Union are 20%.

Druckenmiller’s short answer suggests that he is not a fan of the current tariff schedule, indicating that he would support a broad reduction to 10% or lower levels.