Until markets have clarity on this, we’re going to be choppy
| | | | | | | | | | | | Editor’s Note: Check out what Nate is doing this week to take advantage of the tariff volatility in the markets. Catch his presentation here
Hey y’all,
One thing we know for certain right now: this crash is artificial.
Sure, it may be that we needed a cooldown period in the market. It might be that there are some genuine questions about the economy. It’s true that P/E ratios were soaring out of control.
But we only need to look at the absurd price action on Monday to realize that any relief from the tariff talk might be all it takes to send the markets shooting higher: | | | | |
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| | | | With that in mind, there is really only one question the Trump Administration needs to answer right now:
Do you want lower trade barriers? Or do you want to resolve trade deficits?
Now, trade barriers and trade deficits are very different things. Unfortunately, the administration has been using the terms more or less interchangeably, which makes it very difficult to know how, if at all, this trade war might come to an end.
When President Trump debuted his now-infamous chart of reciprocal tariffs, the base rate for tariffs from other countries was not based solely on their actual tariffs, but a hybrid of tariffs and trade deficits.
When asked whether the EU offering to go to zero-for-zero tariffs with the U.S. was enough, he said no and insinuated that the EU had been “hurting” the U.S. for too long.
Now, I’m certain when President Trump enters the conversation, some readers will automatically leap to assumptions, positive or negative. But try to strip those away for a second.
Suppose any administration could create a tariff policy that shocked the world into lowering trade barriers and creating a much freer global trade network that increased prosperity for everyone and turned up the heat on foreign adversaries like China. In that case, I think most people would agree that that would be a positive thing.
But it’s not clear that that’s what the United States actually wants.
Kevin O’Leary made a passionate plea on CNN last night that the Trump Administration had a unique chance to bring China to the table and flex its muscle as the world’s greatest economy.
I think that could be true — if we weren’t simultaneously tariffing all our allies and driving some of them right into China’s arms.
And that’s why the central question is so important right now.
Does Trump want better trade deals? If so, his administration needs to start announcing settlements with allies like Israel, Japan, even Vietnam and the EU, and do it fast.
If those agreements begin to take shape and become public, I tend to think the markets will bounce back extremely quickly.
But if his regime truly wants the elimination of trade deficits, well… it’s not clear that that’s even possible, and if it is, it requires a total rewriting of the global economy.
It seems unlikely to me that such an aim could be achieved even in a four-year Presidency, and it seems almost impossible to me that President Trump’s hand-picked successor (or even President Trump himself, if he finds a way around the 22nd amendment) would win an election to be given a chance to see that policy through if the economy is in shambles in 3.5 years.
The markets are always looking for clarity, and the White House seems to be trying very hard to offer none.
It’s time that changes.
One resource you can use in the meantime is our new tariff tracker, a free tool from ProsperityPub.
It will give you the latest updates on the markets and top headlines you should pay attention to, all in a one-stop shop.
Enjoy it!
To your prosperity, | | | | |
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| | | | Stephen Ground
Editor-in-Chief, ProsperityPub
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Editor’s Note: Check out what Nate is doing this week to take advantage of the tariff volatility in the markets. Catch his presentation here Hey y’all,
One thing we know for certain right now: this crash is artificial.
Sure, it may be that we needed a cooldown period in the market. It might be that there are some genuine questions about the economy. It’s true that P/E ratios were soaring out of control.
But we only need to look at the absurd price action on Monday to realize that any relief from the tariff talk might be all it takes to send the markets shooting higher: With that in mind, there is really only one question the Trump Administration needs to answer right now:
Do you want lower trade barriers? Or do you want to resolve trade deficits?
Now, trade barriers and trade deficits are very different things. Unfortunately, the administration has been using the terms more or less interchangeably, which makes it very difficult to know how, if at all, this trade war might come to an end.
When President Trump debuted his now-infamous chart of reciprocal tariffs, the base rate for tariffs from other countries was not based solely on their actual tariffs, but a hybrid of tariffs and trade deficits.
When asked whether the EU offering to go to zero-for-zero tariffs with the U.S. was enough, he said no and insinuated that the EU had been “hurting” the U.S. for too long.
Now, I’m certain when President Trump enters the conversation, some readers will automatically leap to assumptions, positive or negative. But try to strip those away for a second.
Suppose any administration could create a tariff policy that shocked the world into lowering trade barriers and creating a much freer global trade network that increased prosperity for everyone and turned up the heat on foreign adversaries like China. In that case, I think most people would agree that that would be a positive thing.
But it’s not clear that that’s what the United States actually wants.
Kevin O’Leary made a passionate plea on CNN last night that the Trump Administration had a unique chance to bring China to the table and flex its muscle as the world’s greatest economy.
I think that could be true — if we weren’t simultaneously tariffing all our allies and driving some of them right into China’s arms.
And that’s why the central question is so important right now.
Does Trump want better trade deals? If so, his administration needs to start announcing settlements with allies like Israel, Japan, even Vietnam and the EU, and do it fast.
If those agreements begin to take shape and become public, I tend to think the markets will bounce back extremely quickly.
But if his regime truly wants the elimination of trade deficits, well… it’s not clear that that’s even possible, and if it is, it requires a total rewriting of the global economy.
It seems unlikely to me that such an aim could be achieved even in a four-year Presidency, and it seems almost impossible to me that President Trump’s hand-picked successor (or even President Trump himself, if he finds a way around the 22nd amendment) would win an election to be given a chance to see that policy through if the economy is in shambles in 3.5 years.
The markets are always looking for clarity, and the White House seems to be trying very hard to offer none.
It’s time that changes.
One resource you can use in the meantime is our new tariff tracker, a free tool from ProsperityPub.
It will give you the latest updates on the markets and top headlines you should pay attention to, all in a one-stop shop.
Enjoy it!
To your prosperity, Stephen GroundEditor-in-Chief, ProsperityPub |
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