Wall Street is waking up to the most hostile parts of Trump's agenda - and the worst is yet to come

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President Donald Trump

• Investors have been roiled by President Donald Trump's tariffs on China and the country's response.
• That's in contrast to last year, when promises of tax cuts and deregulation helped support the market.
• According to Larry Hatheway, the chief economist and head of investment solutions at GAM, there's been a change in the views on whether Washington is going to be supportive of markets.

The Trump bump for the stock market is turning into something else.

For a variety of reasons, 2017 was the second-best year for stocks since the recession. High on the list were President Donald Trump's promises to cut corporate taxes, motivate companies to return billions of untaxed profits to the US, and scale back regulations.

But in 2018, the other half of his agenda is becoming more evident, particularly as it concerns his promise to fight for fairer trade deals.

"In 2017, Washington politics were definitely business friendly: tax cuts, deregulation," Larry Hatheway, the head of investment solutions and chief economist at GAM, told Business Insider. "In 2018, Washington politics are definitely business unfriendly: protectionism and selective White House criticism of certain fairly important parts of both the equity market and of the growing ecommerce world."

US equity futures plunged Wednesday after China announced plans to impose roughly $50 billion in tariffs on more than 100 different American products, including important exports like soybeans and autos. The tariffs, which don't go into effect immediately, were retaliation for similar measures the US slapped on Chinese steel, aluminum, dishwashers, and solar panels.

Trump's motivation includes appealing to his voter base, Hatheway said. And this could get amplified ahead of the November 6 midterm elections, when seats in the Republican-majority House of Representatives and Senate will be contested.

"I think there's a perception that with partisan politics again becoming dominant as we go into midterm elections, the White House's strategy is to go deep with its voter base rather than go broad," Hatheway said.

"Going deep means going back to issues that were successful in the campaign - anti-immigration, protectionism - and those are just not going to be as supportive for equity markets and for business confidence as the prospect of tax cuts and deregulation."

As Trump puts more pressure on China, he's certainly keeping tabs on the stock market, which he has repeatedly praised and took credit for as it surged during his presidency. Since the market started rolling over, the White House has said the administration is focused on long-term economic fundamentals.