The Blubber

Billionaire hedge fund manager Paul Tudor Jones warned Tuesday that the stock market is likely to drop to new lows, even if President Donald Trump scales back his aggressive tariffs on China.

“It seems pretty straightforward to me,” Jones said during an appearance on CNBC’s Squawk Box. “You’ve got Trump sticking with tariffs and the Fed holding firm on not cutting rates. That’s not a good setup for equities.” He added, “Even if Trump pulls back the China tariffs to 50%, we’ll probably still head lower.”

Jones’ cautious outlook follows last month’s market turmoil triggered by Trump’s rollout of some of the steepest import tariffs in decades. The S&P 500 experienced a sharp decline in response but has since recovered a large portion of those losses, though it remains around 8% below its record high.

Trump imposed tariffs of 145% on Chinese imports earlier this year, prompting retaliatory duties of 125% from Beijing. China recently signaled it may be open to restarting trade talks with the U.S.

“He might reduce tariffs to 40% or 50%, sure,” Jones said. “But even then, it would still represent one of the biggest tax hikes since the 1960s. That alone could shave 2% to 3% off GDP growth.”

As founder and CIO of Tudor Investment, Jones sees further market weakness ahead, citing a worsening macroeconomic backdrop. The Federal Reserve has kept its benchmark interest rate in a range of 4.25% to 4.5% since December, with Chair Jerome Powell saying the Fed is waiting for more clarity on trade developments before making any moves.

“Unless the Fed goes full-on dovish and cuts rates significantly, markets will likely retest new lows,” Jones said. “Once we hit those lows, things will start to get more painful. That could push both the Fed and Trump to act. Then maybe we’ll see something closer to reality.”

Jones, who gained fame for correctly predicting the 1987 stock market crash, also serves as chairman of Just Capital, a nonprofit that evaluates U.S. companies based on environmental and social performance.