Don't worry too much about tariffs as they may be 'for the LOLz,' analyst says

• Escalating tariff threats are likely short-lived and theatrical, BCA Research's Marko Papic said.
• Markets may be overpricing trade war fears amid a reversible, policy-driven slowdown, the analyst said.
• Papic said this week's tariff rhetoric is "for the LOLz" and sees a US-China trade deal as likely.

Investors fretting over escalating US-China tensions may be overreacting, according to one leading macro strategist who said the latest tariff threats might just be "for the LOLz."

Marko Papic, chief strategist at BCA Research, downplayed the long-term significance of renewed threat rhetoric by the US and China, suggesting that much of the current tension is performative and likely to be walked back.

"As the kids would say — just for the LOLz," Papic said in a CNBC interview on Friday.

He pointed to both China's and the US messaging as evidence.

On Friday, China's finance ministry accused the US of "bullying". It warned the US risked becoming a "joke" on the world stage if it continued imposing higher tariffs that "no longer make economic sense."

The White House posted on X on Wednesday that the public should let President Donald Trump "cook," a meme-like phrase commonly used to suggest someone is executing a plan.

Papic argued that markets are already adjusting to the rising risk of policy-induced recession, especially in commodities. But he cautioned against becoming "overly bearish."

"It's not like this is a great financial crisis," he said. "It is a policy-induced slowdown," he said, saying such slowdowns can be reversed.

"I think the market, including for commodities, is going to look through further pain that may come from fundamental hard data if policymakers start talking about this as being just for LOLz," Papic said.

He also questioned whether elements of the administration's trade strategy, including using tariffs to raise revenues and reshoring US manufacturing, would materialize.

"I think the markets are going to slowly move away from the worst-case scenario, which is that we're in some sort of a neo-McKinleyist world where tariffs are used to raise revenue to finance tax cuts. When was the last time any US policymaker actually referred to them as revenue raisers?"

Markets appear to be taking a more cautious stance. The S&P 500 recently pulled back from a high of about 4,800 points, while the dollar has weakened sharply, especially against the euro, which has been up 10% over the past several months.

Still, Papic suggested investors take a step back from the headline volatility, noting that Trump on Thursday said he is looking forward to reaching a deal with Beijing.