Late last week, I wondered if maybe — just maybe — the trade charade was drama for the sake of it.
“This guy’s out here telling people, basically, ‘Hey, I’m gonna try to maybe get us back to SPX ~5900 over the next few days by lowering my 145% China tariffs to 50%,'” I wrote, in response to a reader comment.
“This guy” was Donald Trump, and my question was “What’s the point of this?” “How,” I asked, “is this constructive for anybody, anywhere?”
Fast forward three days and S&P futures were tipping SPX 5850 on the heels of Trump’s decision to cut China tariffs to 30%. So, “nailed it.” Almost.
This was good news for people who bought stocks on the dip last month, but I’m not sure who else it’s good for. Nor am I convinced anything at all was accomplished by the world’s two largest economies briefly declaring a trade embargo on one another.
Professional imperatives — including tyrannical compliance departments — limit what Wall Street can and can’t say, which means I would’ve lost my job by now. This whole thing’s pure, unadulterated farce. Moronic, inane farce. And unavoidably. That’s key, hence the italics. There’s no way around it. No serious person could possibly take the trade war serious after today.
Here’s the reality: The President of the United States rides the short bus. There’s no logic to any of this, there’s no plan, Trump has no principles, he’s not committed to anything, he’s undisciplined, he’s impatient and, to reiterate, he’s disabled. This is a literal version of The Hangover Rain Man joke. (“He practically bankrupted a casino, and he was a rehtard.”)
Again, you won’t get anywhere near that kind of acerbic truth-telling from Wall Street. About the closest they’ll come is expressions of incredulity at the head-spinning nature of Trump’s various and sundry about-faces.
“I’ll be honest — I have more questions than answers at the moment,” Deutsche Bank’s Jim Reid said Monday. “It seems that more pragmatic voices in the US administration have taken control again, the near-term economy is being prioritized over the long-term security agenda and the US needs trade to continue for now, and perhaps overestimated the leverage high tariffs would give them in extracting concessions.”
Yes indeed on that latter point. Here’s a short summary of what’s happened on the Trump-China front over the last three months. Trump raised tariffs on China. China told Trump to go f-ck himself. Trump raised tariffs on China again. China told Trump to go f-ck himself again. Trump raised tariffs on China again, again. China told Trump to go f-ck himself again, again. Trump said, “Hey maybe let’s meet and talk about this?”
In his own Geneva summit postmortem, George Saravelos called the climb-down “highly stage-managed,” and “a clear signal of negotiations moving into a more ‘respectful’ phase per Chinese demands.”
David Seif, head of developed market economics at Nomura, described the reduction of US tariffs as “really a big and positive surprise, especially since Trump had floated a reduction only to 80% this weekend.” It was, Seif went on, “a far larger backtracking from Trump than we had expected” and represents “major upside risks to our growth forecasts and downside risks to our inflation forecast.”
His colleague Charlie McElligott underscored the point. “This is effectively [a] hard reset and unwind of ‘US stagflation’ and ‘global growth shock’ trades,” he wrote Monday. “At the very least, we are getting a further destruction of ‘left-tail’ downside breakage scenarios, as fears of a self-induced US recession” fade into the de-escalation.
The best — and most matter-of-fact — quote came from Lynn Song, ING’s chief China economist. “Although the de-escalation benefits both economies, the agreement, which significantly lowers tariffs without any concessions, is likely to be viewed as a particular victory for China,” he said, noting that Beijing “had previously demanded a reduction in tariffs before negotiations, and this now seems to have been achieved.”
Of course, this could all go up in flames at any time. As Nomura’s Seif put it, “things can swing back very quickly in the other direction as we’ve seen with the recent nearly round-trip from Trump.”
If I headed a compliance department, I would string up any analyst who even suggested that Trump has improved or strengthened anything. He’s a tee-totaling drunk uncle. The whole thing was ass-backwards from the jump. You want to encourage re-industrialization or at least some re-shoring of critical industries? How about we dismantle and suspend the IRA, and instead impose draconian tariffs that could have been lifted from a Cheesecake Factory menu for all we know. (Actually we know, and it’s sadder than that – all you need to know is 1/4 * 4 = 1).
So what do we REALLY have as it stands on this day? We have one pre-liberation import surge, followed by a slashing of US exports to anyone that mattered (including foreign visitors) and now a second front-running import surge to come now that the diaper-sourced tariffs have been modified, all to detriment of the trade deficit.
And are the factories being built yet, or are we still wasting literally millions of man-hours across the country just trying to understand and stay apprised? If he wanted to encourage re-shoring, he would have started low and slowly ramped up the tariffs over time. But of course, he does the complete opposite, dramatically increasing frictions and costs to the entire economy, to no apparent benefit other than fleeting relief that the worst may be over. And now that we have sub-embargo tariffs, I am fairly confident that we’ll end up pretty much where we started except with more price inflation led by imports. I mean just look at all the calories burned in the stock market. Trillions of dollars of equities sold off then repurchased until we’re right back at pre-Liberation Day levels with nothing else to show for it except a lot of wasted time and energy.
“Again, you won’t get anywhere near that kind of acerbic truth-telling from Wall Street. About the closest they’ll come is expressions of incredulity at the head-spinning nature of Trump’s various and sundry about-faces.”
Yeah, and it’s maddening for a non-pro like myself, as my last decade plus of educating myself (thanks, H!) seems wasted. Case in point, I had to stop listening to a fave podcast, really my only other source of learning after this site for years now, as the guests have ALL been making up backwards looking excuses, reformulations and re-tellings of what was the ‘plan’ since the election. I dipped a toe back in when I saw a trusted name finally back on, and I expected good stuff. (Can I name names, H? Or would you rather we didn’t flame others in your comment section?)
It took me 2 days of mulling over a couple of points that I thought made some sense, but even I was able to poke holes in much of his theories. I really wanted to just email the transcript to H and ask him to shred it faster and better than I could. Suffice it to say, the full on retreat that all readers here knew was coming pretty much wiped out most of that argument, anyway. It’s just so frustrating! And now to hear Trumpcult members swoon in the coming days….. ugh.
That was a waste of time on the China front, now some prices will go from 40% cheaper to consume and more profitable for Walmart to sell to only 25% cheaper but “so what?”. It is Canada, Mexico, and our allies that are the losers – the road-kill in Trump’s idiocy with tariffs. Tariffs have always been a paperwork disaster. The US is not a loser in trade. PERIOD. What we have is a US citizenry that is entering a severe recession thanks to the destructuin of the American system – whatever that was.
Yes exactly. This is all just a load of sh*t ’cause he has no actual governing capacity. He is a human episode of contrived, boring, godless drama. Look at the top line on all of the major news sites right now. It’s either first word “Trump,” about him doing something – action man! – or about stocks ripping.
Calling trump a bull in a china shop, would be insulting bulls. This is a child needing a nap, throwing a tantrum, and nobody wants to ever play with him.
I’m calling (it) bull$hi$ in China—full Stop (er…slop).
Tariffs going cold, budget fight getting hot – on to the next media hyped red herring debacle. There will be lots of stupid stuff said about rich, poor, medicaid and etc., lots of media attention. The Senate fights and it passes, then tRump will step in via X or wait and veto it to save the poor on medicaid, of course keeping the tax reduction for the rich. He is now a hero to all. And the Dems will fight the red herring all along, making the big media save of medicaid more impactful. Then on to the next media managed red herring BS. Ukraine? Next tariff problem, I mean heck, why not be the tariff hero time and time again, say every 90 days? Tariffs could be the gift that keeps giving – China would love it!
According to Jason Miller on The War Room podcast (https://x.com/i/broadcasts/1lDxLlrOkNaxm), the total U.S. tariff rate on Chinese goods now stands at 50%: 10 percent baseline tariff rate plus the 20 percent fentanyl tariff rate plus the 20 percent tariff rate from Trump’s first term. (I have not listened to that broadcast, but it was mentioned by another commentator.)
Not sure the “just in time” inventory restocking, for “just in time” buying before the 90 day pause period assures no recession. Granted, the new deal decreases the probability of a deeper recession, but I’m not sure the behavioral impact is much different. At some point, trump’s unpredictability and “incompetence” (see H’s May 12 article) approaches its devastating limit on consumers’ psyche and willingness to keep preparing for the worst. Inventory build, then buying, followed by inventory restocking, then buying, followed by a sharp decrease in spending (leading to a recession). Unlike post-covid, there is no fiscal stimulus repeatedly appearing in consumers’ mailboxes or Federal reserve willing to maintain ZIRP.
One of the ongoing risks caused by Trump is a gradual diminution of ‘appreciation’ let alone understanding of the risks he poses to the rule of law, economic conditions, markets, etc., b/c taking away the worst case causes many people to mistakenly conclude everything is ok or at least not that bad. Arguably, pre(total)power totalitarianism strategy 101.