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?
* * * * *
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.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2019 AGF Management Limited. All rights reserved.
