Markets have enjoyed a welcome reprieve from the Trump administration’s aggressive trade rhetoric this week.
The (relative) calm likely stems from the fact that Trump himself has been preoccupied with reshaping the Supreme Court and preparing to take the band on world tour with stops in Brussels (where he’ll presumably chide NATO for being freeloaders) and Helsinki (where he’ll undoubtedly be bamboozled by a KGB agent).
Whatever the case, we’ll take it, where “we” refers to everyone in the world. Humanity is at this point utterly exhausted with the incessant (and increasingly shrill) protectionism that emanates from Trump’s Twitter feed and from his subordinates who, over the past several weeks, have been forced into TV cameo after TV cameo to explain exactly what it is that’s going on and why no one should worry.
But lest you should get too comfortable, remember that nothing has been resolved.
Everyone is just waiting on the next shoe to drop and you can bet that once Trump gets back from his overseas jaunt, he’ll be gearing up to implement the second round of tariffs on Chinese goods (levies on $16 billion worth of imports).
In the interest of helping folks keep track of what has become a truly dizzying array of threats and actual action, we thought we’d post the following graphic from Barclays which provides you with comprehensive documentation of what has become a multi-front war:
Of course multi-front wars are almost impossible to win and as more than a few smart people have tried desperately to explain to the U.S. President, it’s not at all clear that it makes sense to talk about “winning” in the context of trade wars.
But don’t tell that to any “very stable geniuses” you might know because to them, not only is it possible to “win” a trade war, but it is in fact “easy.”
Of all the absurd proclamations that have emanated from Trump’s Twitter feed, this one might go down as the most famous when the history of this administration is written:
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
Look back up at that graphic from Barclays – does that look like it’s going to be any semblance of “easy” to you?
Here’s what BofAML’s Ethan Harris says in a new Q&A note to clients regarding the trade conflict:
Question: What could stop the escalation?
Ethan: It needs to be clear to both sides that the war is having significant negative impacts and cannot really be “won.” So far, there seems to be little pain: the economy is strong, the stock market has held up (in the US), and so far there has been relatively little popular backlash. We think that will start to change as the trade war escalates. Rising consumer prices and falling selling prices for exporters could trigger growing angst. And with each escalation, business and investor confidence could come under further pressure.