by Pam Martens and Russ Martens, Wall St On Parade:
If you have ever watched the past Chairs of the Federal Reserve give their semi-annual testimony before the U.S. House and Senate, you are aware of how carefully they parse their words to avoid rattling the stock or bond markets. That’s how people in high places in government with insider information behave.
But now we have Rambo in the Oval Office, randomly throwing grenades into already wildly fluctuating markets. This leads foreign investors as well as U.S. investors to question if they want their life savings to be invested in this carnival barker-like circus. Bloomberg News underscores this reality with an article today about a $60 billion money manager who is considering selling all of his U.S. assets because of the political risk.
At around 8:40 p.m. last eve, we settled in to watch the news. We learned that President Trump had released a statement indicating a plan to impose “$100 billion of additional tariffs” on China. The U.S. had already announced tariffs on $50 billion of Chinese products and China had responded in kind. The stock market has been fluctuating wildly in recent days on fears of a prolonged trade war.
We checked to see how futures on the Dow Jones Industrial Average were responding to this news. As expected, they were showing a big downdraft of minus 360 points. (The SEC should investigate to see if anyone had outsized negative bets on U.S. index futures last night.)
The plunge in markets came in response to this official statement from the President:
“I have instructed the USTR [U.S. Trade Representative] to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs. I have also instructed the Secretary of Agriculture, with the support of other members of my Cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests.
“Notwithstanding these actions, the United States is still prepared to have discussions in further support of our commitment to achieving free, fair, and reciprocal trade and to protect the technology and intellectual property of American companies and American people. Trade barriers must be taken down to enhance economic growth in America and around the world. I am committed to enabling American companies and workers to compete on a level playing field around the world, and I will never allow unfair trade practices to undermine American interests.”
The Chinese Commerce Ministry shot back with this:
“If the United States disregards the opposition of China and the international community, and insists on unilateralist and protectionist trade practices, the Chinese side will follow through to the end and will not hesitate to fight back at any cost. We will take new comprehensive measures to respond and resolutely defend the interests of the country and the people.”
The outcry against the President’s sudden action was quick. The National Retail Federation released a statement telling the President to “Stop Playing Chicken With the Economy.” The statement read in part:
“These tit-for-tat trade actions could spell disaster for the U.S. economy and make it harder for Americans across the country to afford everyday products and basic necessities. It is inevitable that China will respond with more retaliatory actions that cause even further harm to American farmers, businesses and consumers. We urge the administration to change course and stop playing a game of chicken with the nation’s economy.”
Republicans, particularly those in midwest states whose agricultural products stand to be hurt by retaliatory Chinese tariffs on U.S. farm exports, are quietly fingering their worry beads and having nightmares about the potential for a Blue Wave to sweep the nation in the midterm elections in November.