When is a win not a win?
When it's a trade war win.
Yesterday, in the midst of one of the worst sell-offs we had in ages, there was a moment where I genuinely believe that market participants thought that the president might actually take this WTO judgment against Europe and do nothing with it except negotiate for better terms on other goods. After all, the ruling, against Europe for dumping Airbus planes was 15 years in the making. Why not lever the judgment that the unfair subsidizing cost of us $7.5 billion to show some graciousness and negotiate in gentlemanly terms for better agreements on some of the more egregious aspects of trading with the EU.
Slapped the duties right on.
Locked and loaded.
Right in their faces.
No negotiation just here's the new duties on wine and scotch and a host of other European imported goods.
Then why didn't the market crater today?
Because there actually are some people who believe that the White House could have been more punitive when it came to wine or cheese or plane parts. That's right, they are happy because the $7.5 billion worth of tariff pain didn't crush LVMH (LVMUY) or Hermes (HESAY) - hence this tie- or some of their finer leathers goods.
This, my friends, is insanity.
The fact is that the president wants tariffs everywhere to correct trade imbalances. Everywhere. He feels we have been a patsy everywhere. He regards this ruling as a huge win and he wants to use it to escalate an already simmering war. Hence the win is not a win for the stock market which knows these tariffs slow growth. It's a win for America against unfair traders. That, of course, is true but it isn't what's going to reignite the U.S. economy. Punitive behavior doesn't help if you are fighting a slowdown, which, judging by some of the bigger indicators, we most certainly are.
I find it astonishing that, this late into this man's first term, investors and commentators do not understand that the president's goals are often a antithetical to the market.
Now I think the president believed in a two-pronged trade strategy. On the one hand he would fight our so-called allies and force them to open plants here while also starving China so it couldn't cheat, lie, steal or even compete. On the other hand, the Fed would back him up to cut rates and force the dollar lower and help grow the economy.
I think he believed that it would be a team effort. Whenever he did something like slap tariffs on which could slow the economy, he thought the Fed Chief would cut rates to make the economy make up for the lost commerce from tariffs.
But Fed Chief Powell is not a team player. Or at least not a Trump team player. He raised rates with alacrity. He's cautious on the cuts, though, and I feel like he's been dragged, kicking and screaming into doing so. Who wants to look like they are caving to the president? No central banker I know.There is no coordinated action.
Right now we haven't been able to revive much manufacturing, in part because our nation had pretty much given up competing with the rest of the world because our workforce is too expensive. Plus, the Fed funds rate is too high versus where the bond market says it should be. That's kept the dollar so high that you can't really stimulate exports.
It's not like we are going to create a lot of jobs by putting tariffs on wine and olive oil.
Instead we just have indecision on the part of the larger enterprises with managers who are paralyzed by where the next tariff's going to hit.
We are fortunate in that the domestic economy is humming. That's made up so far for the slowdown in international commerce. The job creation that Paychex (PAYX) talked about last night is very real. The shortage in labor is a godsend for workers.
But by turning a win into a loss when it comes to true tariff reform, we've gotten nowhere.
I am all for the trade war against China. I am furious that Europe subsidizes their businesses by constantly debasing the euro. However, simultaneous worldwide trade wars could be self-defeating for a president who wants growth and doesn't have a partner in the Federal Reserve to give him support.
That's why a win wasn't a win and judging by the president's temperance, never will be.