Ok, just to reiterate, the market is hyper-sensitive to trade headlines right now, and that’s understandable. After all, the Trump administration is on the verge of slapping tariffs on another $267 billion in Chinese goods, which would entail the U.S. taxing literally everything China ships to the U.S.
On October 29, reports indicated that a list in conjunction with those new tariffs could be published early next month assuming there is no breakthrough at the G20 when Trump meets with Xi. Three days later, Trump tweeted about a phone call he had with the Chinese President, which he (Trump) described as “very long” and “very nice”. Hours later, Bloomberg published an article that suggested Trump had instructed aides to draft the terms of a truce and that catalyzed the best day for Hong Kong and South Korean shares in seven years.
That was a bit of a false start. Larry Kudlow would subsequently throw cold water on the “draft truce” rumor and since then, we’ve been in limbo. This week, there were tentative signs of progress ahead of the G20 including news that Steve Mnuchin has chatted with the Chinese Vice Premier (again) and reports that Beijing has sent a written response to Washington regarding U.S. demands.
Still, nothing is definitive here and indeed, it was just yesterday (Thursday), when Wilbur Ross explicitly said that a concrete deal before January wasn’t likely, which means that at the very least, the tariff rate on the $200 billion in goods which were hit with 10% duties on September 24, will go up to 25% at the turn of the calendar year.
Given that, it’s hard to get too excited about Friday’s headlines which find Trump contending that he “may not have to do more Chinese tariffs” and that China “wants to make a deal.” The market bounced on that news, and if you were one of the people buying, I’d like to know if you actually watched the clips, because if you had, I think you’d be a bit less enthusiastic.
Fortunately, I have those clips for you so you can make a more informed decision. Here are the actual comments that folks are interpreting as “newsworthy”:
There is exactly nothing in there that Trump hasn’t said at some point before, although the reference to “maybe not having to do more tariffs” is marginally positive, I suppose.
But more important than those throwaway lines is undoubtedly the following clip which finds Trump attempting to describe his trade “strategy” when pressed by reporters to elaborate:
Got that? This whole global plunge into protectionism is predicated on Trump’s assessment of U.S. trade policy which he claims was previously “meant for stupid people.” Decades of work on globalization and free trade was “for stupid people” and now, he and his “very large brain” are going to change that.
If you’re more optimistic about the trade war now than you were on Friday morning based solely on the above soundbites, and you’re trading on that optimism, well then, I guess I would echo the President:
We can’t have trading that’s made for stupid people.