The bull market has entered a critical crossroad due to uncertainty involving the Trump tariff, and the situation is raising red flags on Wall Street.

The BlackRock Investment Institute's Terry Simpson says if the tariff becomes a reality, the firm could back away from its positive outlook on stocks.

"This is a game changer if it actually does materialize," the firm's multi-asset investment strategist said Tuesday on CNBC's "Futures Now." "Let's make no mistake about it, tariffs are bad economic policy."

Yet that doesn't seem to be deterring President Donald Trump, who reaffirmed his plan to put tariffs on steel and aluminum imports on Tuesday. He declared, "Trade wars aren't so bad."

But to Simpson, it's the danger topping the firm's watch list — eclipsing rising interest rates and inflation.

The overwhelming fear is that a trade war would create an unfavorable global growth environment. It has been one of the pillars of bull markets around the world.

"If we have a push to tariffs, that hurts global trade and that's going to hurt developed markets. That's going to hurt emerging markets. That really adjusts the global growth story," said Simpson.

This scenario would be a major issue for his firm, which is overweight emerging markets.

"If you have a reduction in global trade where emerging markets are very dependent on, that probably would hurt emerging markets' risk assets particularly on the equity side," he added. "Specifically, maybe EM [emerging market] Asia since they are so heavily tied to the global supply chains."

Simpson isn't ready to back away from his bullish take on stocks because the fundamental story is solid. For now, he's taking a wait-and-see approach.

"We don't want to adjust our portfolio, how it stands off the expectations, off what might happen," Simpson said. "Hopefully, cool heads will prevail as we think about the tariff policy."