Over the objection of Republicans and advisors, the Administration has announced the imposition of large tariffs on steel and aluminum that will be instituted next week.
The White House is living in the past as tariffs will help a handful of companies that provide little value added (and are members of the "old economy") -- and will hurt countless companies and the consumer.
Tariffs suggest a rising chance of "stagflation" -- higher inflation and moderating global economic growth.
I also believe that Gary Cohn's days (as Director of the National Economic Council) are now numbered.
Finally I stand by my comments on expanding risks:
I am increasingly fearful of the rising political and geopolitical risks.
* These growing risks are not market friendly
Away from my personal political views -- I am raising my political and geopolitical concerns as they relate to the markets.
This is a very subjective issue but I believe we are seeing an unraveling (a dysfunctional White House, the potential for trade wars, terrorism, etc.) that is not currently priced into the markets.
The timing is also difficult to predict -- but I believe political and geopolitical headwinds are likely creeping up on investors (and the world).
This means that it will be increasingly difficult to ascertain what the effect on world wide economic growth will be.
My guess, for now, is that it will be a magnitude that none of us can compute.
Remember several of my questions that I ask myself everyday:
- In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are?
- In a flat, networked and interconnected world, is it even possible for America to be an "oasis of prosperity" and a driver or engine of global economic growth?
- With the G-8's geopolitical coordination at an all-time low, how slow and inept will the reaction be if the wheels do come off?
As I wrote, I don't have the answers but I am increasingly fearful of rising political and geopolitical risks.
I have expanded my short exposure.
More Tariff Observations
* You have to out compete -- you can't tax your way to prosperity and tariffs are taxes.
* The tariffs reflect the ignorance of Peter Navarro (director of the White House National Trade Council) and the disorganization and lack of clarity of thinking in the White House.
* Tariffs will hurt more industries and employees than they will help.
* Tariffs will hurt our security more than they will help our security.
* Tariffs will contribute to a rising probability of "stagflation" -- by raising inflation and reducing economic growth and trade.
Some Saw it Coming
Here was my first surprise in my 15 Surprises for 2018 (delivered last December):
Surprise #1: President Trump's Behavior Finally Does Matter:
With domestic economic growth slowing by mid-year, Trump retaliates against China in a major trade war, serving to exacerbate the economy's slowing rate of growth.
Doug Kass's comments on Trump and Tariffs originally appeared on March 1 on Real Money Pro, our premium site for active traders and Wall Street professionals. Click here to get great columns like this even earlier in the trading day.