Forget tacos, can Trump have his tariff cake and eat it too? Wall Street’s biggest bull thinks so

• If President Donald Trump’s tariffs settle around 10%, that could still allow the Federal Reserve to cut rates later this year while they generate revenue that helps with the massive budget deficit, according to Wells Fargo’s Christopher Harvey, who thinks a levy at that level could be split between importers, corporations, and consumers.

There has been much talk lately about President Donald Trump and tacos, but another food entering the tariff conversation could be cake.

While his “Liberation Day” announcement roiled markets, he has largely pulled back from his most aggressive stance since then, though on Friday night he said he will double steel tariffs to 50%.

The overall direction of travel remains positive for Chris Harvey, Wells Fargo Securities’ head of equity strategy, whose S&P 500 price target of 7,007 makes him Wall Street’s biggest bull.

“The Trump administration does want to move things forward,” he told CNBC on Friday, hours before the steel announcement. “They appear to want to push the ball forward, and I think that’s a positive. We’re now at the point where I think we’re going to start to hear some real tangible results over the next couple of weeks.”

Harvey added that he thinks stocks could jump by double digits in the second half of the year. His S&P 500 forecast implies an 18.5% surge from Friday’s close.

A key piece to his thesis is Fed Governor Christopher Waller’s recent statement that if tariffs end up around 10%, then the central bank could be in a position to cut rates in the second half of the year.

Tariffs are generally seen as inflationary and could force the Fed to hold off on monetary easing. But if consumers treat them as one-off price hikes and keep their longer-term inflation expectations anchored, then there could still be leeway to lower rates.

For now, the effective tariff rate remains above 10%, though estimates differ. The Budget Lab at Yale put it at 17.8% last month, while Fitch put it at 13%.

Harvey expects tariffs to settle in the 10%-12% range and said that even as clients express anxiety about all the uncertainty, they are still comfortable with the economy’s fundamentals.

That prompted CNBC’s Scott Wapner to ask if Trump can have his cake and eat it too, namely, moving ahead with his tariff agenda and getting the Fed rate cuts that he’s been demanding.

“I think so,” Harvey replied. “So the reason why we said 10% is with 10% we think a third will be eaten by the importer, a third eaten by the corporation, and a third will be eaten by the consumer. That’s not a big impact.”

At the same time, he added that the tariffs will generate revenue that can help with the federal budget, which has seen massive deficits in recent years.

Fears that deficits will worsen under Trump’s proposed budget working its way through Congress have led to volatility in borrowing costs as bond market jitters have jolted Treasury yields.

Meanwhile, as trade talks continue, it’s more important for the Trump administration to reach deals with India, Japan and the European Union, Harvey said, adding that China is less critical since the U.S. is in the process of disintermediation from it anyway.

But if tariff uncertainty stretches into June and July, then companies may start resizing their payrolls and then “things start to fall apart,” he warned.

That’s why it’s necessary to make progress on trade and reach deals with big economies like India, Japan and the EU, Harvey said. That way, markets can focus on next year, rather near-term tariff impacts.

“Then you can start to extrapolate out,” he explained. “Then the market starts looking through things. They start looking through any sort of economic slowdown or weakness, and then we start looking to ’26 not at ’25.”

This story was originally featured on Fortune.com

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