Economic Impact of Tariffs: Why the Intermediate Cycle Still Holds Despite Policy Distortions
- May 2
- 6 min read
Wall Street has no shortage of distractions: economic headlines, shifting data points, and unpredictable policy developments dominate the narrative. This week alone, traders had to digest a stronger-than-expected jobs report, a volatile GDP print, and renewed trade speculation between the U.S. and China. Amid all the noise, one constant remains: the intermediate cycle is still rising, and it continues to offer tactical opportunities — as long as it’s respected with proper structure and timing.
At Market Turning Points, we don’t trade the headlines. We trade cycles, structure, and price behavior. And today’s environment perfectly illustrates the difference between reactive trading and disciplined, cycle-based execution.
Why Tariff-Driven Volatility Isn’t Derailing the Intermediate Uptrend
Let’s start with the dominant headline risk: tariffs. Ongoing trade tensions have re-entered the spotlight as China publicly floated the idea of reopening trade talks with the U.S. That comment alone added a shot of optimism to an already firm short-term rally.
This kind of news is seductive — it tempts traders to over commit or jump in late. But the reality is that tariffs distort behavior long before they alter cycles. Companies rush to import goods, reorder supply chains, and adjust margins. Those distortions show up in shipping data, purchasing patterns, and inventory levels.
Yet despite those shocks, the intermediate market cycle has held firm since the momentum low on April 3 and the second short-term cycle low on April 21. Traders following cycle alignment and crossover signals were already positioned. The rally that followed has continued steadily, even in the face of a complicated policy backdrop.
Intermediate Cycle Outlook: Where Are We Now?
Our cycle Visualizer projections show:
The intermediate uptrend remains intact
The projected peak window falls between May 5 and May 12
That means the current rally, while aging, still has room to stretch — but it also requires tactical discipline. It’s important to avoid chasing moves late into the cycle and instead manage trades with layered stop levels, particularly under the 2/3 and 3/5 crossover averages.
Historically, intermediate peaks do not form in a single sharp reversal. Instead, they tend to build gradually, often driven by retail buying or sentiment shifts before the final rollover takes hold. We are likely entering that stage now — where the trend is still alive, but the risk of chasing too late increases day by day.
Policy Shocks Distort Data — But Not Cycles
Tariffs and similar macro policies have a habit of distorting economic data before they shift underlying trends. Consider this week’s GDP report:
Q1 GDP came in at 0.3%, well below Q4’s 2.4%
Much of the weakness came from a 41% spike in imports, as companies raced to stockpile ahead of potential tariff changes
That front-loading of activity is a classic distortion. It doesn’t reflect organic weakness or strength — it reflects policy-driven urgency. The data gets clouded, which confuses investors relying on backward-looking metrics.
Meanwhile, cycle timing isn’t affected by noise. It reflects the rhythm of sentiment, liquidity, and structural participation — which remains constructive in the intermediate term.
It’s essential to filter macro distortion through a cycle-based lens. Not every headline leads to a market shift — but when underlying leading indicators start to confirm the projected reversal zone, caution is warranted.
Check our post on Leading Economic Indicators and Cycle Timing: Why This Rally May Be on Borrowed Time for more info.
Labor Market Signals Confirm Support
Adding to the bullish bias, this morning’s jobs report came in stronger than forecast:
April payrolls: 177,000 (vs. 133,000 expected)
Unemployment rate: Steady at 4.2%
That’s a positive surprise, especially considering broader concerns about recession and tariff drag. It adds a layer of support to short-term optimism, giving traders additional confidence in the current uptrend — but only while it lasts.
Cycles always win out in the end. This report reinforces the idea that we’re still in a valid window for continuation, but it also highlights the importance of tactical risk control.
Why Chasing Here Gets Risky
The challenge now is one of timing and structure. The cycle is maturing, and sentiment is shifting. Here’s what that means for traders:
Momentum buyers often pile in during the later stages of a move
Intermediate tops typically form via slowing momentum and failed breakouts
Risk of reversal increases as price pushes toward the cycle high
That’s why our focus shifts from entry to exit strategy as we approach the topping window. Traders who entered earlier off the April lows should be scaling out or trailing stops — not initiating fresh long exposure without clear structure.
What Traders Also Want to Know About the Economic Impact of Tariffs
How do tariffs distort economic indicators?
Tariffs create ripple effects throughout the economy by altering behavior before they impact fundamentals. For example, when companies expect higher tariffs, they often rush to bring in inventory ahead of time, inflating import data. That kind of front-loading can skew GDP, trade balances, and even inflation temporarily. On the flip side, some companies may delay orders or reduce inventories, anticipating higher costs, which falsely signals economic weakness. These distortions make it harder for traders to trust surface-level economic reports.
For tactical traders, the key is to recognize that these short-term data swings are often reactive, not predictive. Cycle models offer a clearer picture of where price action is likely headed, independent of these temporary macro shocks.
Can tariffs change the direction of a market cycle?
Tariffs don’t directly break or initiate a market cycle. What they can do is amplify volatility within a cycle, which might cause early exits or trap traders acting on fear. A cycle, once established, reflects a much deeper rhythm of market behavior — based on liquidity, participation, and broader sentiment trends. If those core elements hold up, the cycle stays on track regardless of the headlines.
So, while tariffs can shorten or lengthen the wave temporarily, they don’t typically override the underlying direction unless structural support or resistance breaks down in alignment with timing windows.
How does Steve recommend trading through tariff-related volatility?
Steve teaches a disciplined approach: don’t react to noise. Instead, follow structure. That means:
Layering stops below crossover averages like the 2/3 and 3/5 levels
Watching the 5-day price channel for breakdowns
Confirming any trade entries with cycle alignment
In volatile policy environments, size down, manage expectations, and be quicker to take profits. If the cycle supports the trade, stay with it — but remain ready to shift if price structure breaks.
Why is the intermediate cycle so important?
The intermediate cycle is where most traders can capture reliable, high-probability swings without getting chopped up in short-term noise. It spans several weeks to a few months — long enough to ride a trend, but not so long that it requires holding through major reversals. It also helps keep traders focused on broader market structure instead of getting caught in every headline twist.
This cycle often carries the best blend of reward-to-risk opportunities and is the most relevant for swing traders looking to navigate environments like the one we’re in today.
When will we know the cycle has peaked?
We won’t predict it — we’ll confirm it. The top usually becomes obvious only in hindsight, but the signs tend to follow a pattern:
Price stalls at or just above reversal zone highs
Momentum fades or fails to make new highs
Breadth narrows even as indexes push higher
Price violates key moving averages or channels (like the 2/3 or 3/5 crossovers)
At that point, traders should already be out of long positions or actively rotating into defense. The goal isn’t to catch the exact top — it’s to exit while structure is still intact, before the breakdown accelerates.
Resolution to the Problem
Traders who rely on headlines are often too early, too late, or caught off guard. But those who follow cycle structure and timing can navigate even noisy environments like this one.
Despite the policy distortions caused by tariffs and economic crosswinds, the intermediate uptrend remains intact. Our focus now is managing risk while still participating in the upside.
At Market Turning Points, we equip traders with:
Daily cycle forecasts
Structural overlays to frame support and resistance
Visualizer tools to time entries and exits with confidence
The market doesn’t care about headlines. It responds to rhythm. And right now, that rhythm still points higher — but only for a limited time.
Join Market Turning Points
If you’re tired of guessing and ready to trade with structure, discipline, and cycle confirmation, we can help. Market Turning Points delivers the tools and timing to:
Stay ahead of reversals
Manage trades with clarity
Avoid emotional decision-making
Conclusion
The economic impact of tariffs is real, but it's not a reason to abandon a rising market. It’s a reminder to stay grounded in structure, not stories.
Right now, the intermediate cycle is still rising — backed by stronger jobs data, improving short-term momentum, and healthy participation. But that window won’t last long.
As we approach the projected cycle peak, traders must shift from offense to defense — tightening stops, trimming size, and preparing for the next turn.
Follow the cycle. Respect the structure. Trade what’s real — not what’s loud.
That’s the Market Turning Points advantage.
Author, Steve Swanson
