Trump may be raising tariffs to eventually get our trading partners to lower theirs, but that’s a dangerous strategy with a lot of moving parts. From David Stockman at davidstockmanscontracorner.com:
The only carbon units more delusional than the Donald about the distinctively un-awesome state of the US economy are the boys and girls who inhabit the canyons of Wall Street. They are being given every chance to get out of Dodge, but they keep bellying up to the bar for still another swig.
Consider yesterday’s doings. The White House actually confirmed during market hours that Trump is moving towards a 25% tax on Americans who buy goods made in China—-and those are mostly the cheaper goods in the Wal-Mart aisles which represent what Flyover America can actually afford to buy.
Taxing that stuff by 25% is full retard crazy—-even if the White House might argue that people can still order soon-to-be more costly lamps, travel bags, canned tuna, vacuum cleaners and toilet paper on their trusty iPhones, which would remain tax-free under the latest Trumpian demarche.
But if that’s any consolation to the rank-and-file, you’ve got to wonder about Wall Street. The hideously over-valued S&P 500 dropped by the grand sum of 2.93 points (o.10%) at yesterday’s close, and then took off for the races again today as if a potential $50 billionTrumpian war on the American consumer means nothing at all.
Perhaps the Donald will eventually “calm down” as the Chinese government spokesman sensibly urged, and settle for something less draconian. As we explain below, we think that is highly unlikely and that the Donald’s view of trade is so uniquely ego-driven, win-oriented and primitively mercantilist that he means to take his Trade War straight to the brink and beyond.
But even short of that, how in the world can it be held that the risk of a Trade War that would materially disrupt that world economy and financial system is essentially zero— at a time when the Oval Office is occupied by a trade policy madman, who absolutely does have the unilateral power to create mayhem in the global economy under the wide-open authorities of section 301 and section 232 of the trade acts?
That’s right. When the stock market is priced for perfection and then some—-the risk of a major dislocation like a full-fledged trade war has to be close to zero in order to justify standing pat.
To continue reading: Hey, Donald, Trade Is About Economics, Not War, Part 4