” . . trade wars are good, and easy to win.” Wait . . . . whaaat? $SPY $QQQ $DIA $IWM

” . . trade wars are good, and easy to win.” 

Uh . . . no, they are not good, and they are not easy to win. 

President Trump tweeted these words, among others early this morning. During my morning run, my last for a while here on Maui, I heard some reporting about how the announcement yesterday came to be. 

Apparently the announcement of the new steel and aluminum tariffs was on again and off again. The CEOs were gathered in a room awaiting the President and after about a half an hour away in another meeting he returned, summoned the press to the room and then polled the room before making his decision. 

After the announcement the market reaction was swift, and lower. Well, except for steel and aluminum stocks.  

Though we may never know exactly how this President thinks, there are some theories on why he did it and how he did it. Among these theories: 

  • The President tends to play to the audience he is in front of. In this meeting the audience was predominantly steel and aluminum executives. He certainly made them happy and they responded enthusiastically. Reporting said that Gary Cohn argued against them but was a lone voice in the discussion. 
  • The President is shoring up his Rust Belt support. After all, he just announced his re-election bid, the earliest an incumbent has annouced before. He is also playing to his base, who love restrictions on free trade.  
  • The Russia investigation is heating up and there is chaos in the White House and there is need for a new distraction. Hope Hicks just left and Jared Kushner has lost some security clearances pouring more gasoline on the need to distract. 
  • The President truly believes that trade wars are good, and easy to win. 

The last theory, the one where he believes this is a good course would be the most disturbing. There is no other voice besides Wilbur Ross that thinks this is a good idea. 

We can only hope that The President listens to someone else than Wilbur Ross over the course of the next week. 

In my next post I’ll outline why I think that if this policy is actually played out, it could be a real monkey wrench in this market rally.