The “Tariff Guy” Has the Advantage
Author: Greg Valliere
May 7, 2019
PRESIDENT TRUMP FAMOUSLY CALLS HIMSELF the “Tariff Guy,” and there were clear signals yesterday that his brinkmanship on trade could yield results. Three major take-aways . . .
1. The markets, incredibly, shrugged off the threat of massive new tariffs coming this Friday; we think there’s still a good chance of a deal later this spring, and the markets apparently agree.
2. Trump has widespread support in the U.S. for Chinese tariffs. Perhaps Beijing doesn’t appreciate the bipartisan backing Trump enjoys for a tough stance. Even Chuck Schumer urged Trump to hang tough, and many other Democrats agree; there’s a widespread consensus in Washington that China cheats.
3. Hard-liners in the Chinese Communist Party are on the defensive. Sources report that party leaders saw the final draft of the treaty and demanded changes. Trump’s trade negotiators were outraged by what they viewed as “reneging,” and the progressives — led by Vice Premier Liu He — may now have the upper hand.
THE BOTTOM LINE: The lack of a serious market sell-off sent a signal to Trump that he can impose more tariffs — not just on Friday against China but possibly against European autos, while maintaining tariffs against steel and aluminum imports from Canada and elsewhere.
WORTH CONSIDERING: Could it be that investors aren’t concerned by a modest U.S. GDP hit from tariffs? More importantly, are the markets now encouraged that chances have improved for a serious trade deal that imposes structural reforms on China?
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THE GREATER THREAT: With all the furor over trade, a more important crisis was seemingly overlooked — a potential conflict with Iran. A source tells us that there’s a “credible” threat to U.S. troops and assets in the Middle East, prompting a massive American show of force. Trump’s military advisers have intense antipathy toward Iran — “the U.S. is itching for a confrontation,” our source says. The risk is that a minor incident could quickly escalate.
A QUICK POLITICAL NOTE: New polls show Joe Biden with an incredible 30-point lead over his nearest challenger, Bernie Sanders. Biden obviously is the front-runner because most Democrats think he has the best chance of beating Trump.
BUT THE FRONT-RUNNER quickly becomes a target, as Biden will discover as the far right mounts a furious assault on Hunter Biden’s business activities in Ukraine. And Biden can be counted on to step in controversy; is China really not an economic rival, as he absurdly asserted last week? Time to buy mythical “puts” on Uncle Joe.
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