WHACK. That is the sound of the world’s biggest 2×4 piece of lumber hitting global leaders (and markets) over the head to get their attention. To be clear, hitting someone over the head with a 2×4 is just a saying. Law enforcement takes a different view of actually doing it. Sometimes people just don’t pay attention, or take someone seriously, when they threaten to do something. Hence the 2×4 and…….WHACK. Got your attention now.
Last week President Trump “pushed the button” and set in motion a round of tariffs on America’s trading partners. Funny, the world seemed totally surprised. Funny because Trump has been “preaching” his fondness for tariffs since at least 1980 (that’s 40+ years). He ran for office on the promise to enact tariffs. He set deadlines for countries to engage in fair reciprocal trade negotiations. The rest of the world basically said “yeah, we’ve heard all that before.” WHACK.
In the 1990’s a younger Former House Speaker Nancy Pelosi (ah yes, she was young once) made a case for tariffs on China. Obama loved tariffs too. Last year the Former Treasury Secretary Janet Yellen stated she didn’t believe tariffs would be inflationary. Nothing came of them of course, U.S. tariffs were not universally enacted so global leaders shrugged off Trump’s “threats.” Then, last Wednesday evening……..WHACK.
Financial markets sure did not see last week’s announcement as a positive (understatement). Stock markets around the globe went south very, VERY quickly. Not quite panic, but certainly jaw dropping. But what about the positives? Interest rates are lower. With oil crashing, gasoline will be cheaper. Housing will certainly become more affordable. Inflation moderating? Look at the positives……..if you can.
No one should argue that countries around the globe have certainly benefited from unfair trade policies. American companies have faced many obstacles (hello China) attempting to do business in other countries. Not so much from those countries coming here. American manufacturing ditched the U.S. and moved offshore. Now Trump has decided to “fix it.” When long neglected issues experience change, there is pain. When stocks go for years with outsized returns, and no meaningful corrections, there will be pain when markets turn. They have turned.
China, Europe and countless others have been “warned” for years about their trade policies…….the WHACK. Investors have been warned for months and months about extended valuations, frothy speculation and unrealistic expectations………WHACK. So this time wasn’t different….WHACK.
The Golden Age of America may be coming, but nobody said just when. It’s a timing thing.
That Trump guy sure wields the world’s biggest 2×4. Does your head hurt?
