Our Nasdaq is down 1%. Their Nasdaq is down 7%. Our S&P 500 is of .94. Their S&P has receded 5%.
We are kings.
They are pawns.
We don't need them.
They are desperate for us.
We are a cash fueled economy.
They are a debt laded house of cards
We don't need their $500 billion in imports.
They need anything they can get from us save a cup of coffee, a slice of pizza and an iPhone. They can't even deal without our sneakers
You think that the White House isn't thinking just that? Do you think that the president, ever watching television doesn't know where the Dow is? Heck, he might even know that Boeing (BA) , 3M (MMM) and Caterpillar (CAT) are causing the downturn. Maybe he announces a program to give our construction companies a coupon to buy a Caterpillar Earth Mover. Maybe he flies in a 737Max next month. Maybe he takes one to China.
3M's tougher. You can't have the government buy lots of Scotch tape. But you could, as a gesture, offer 50 million 3M masks to the Chinese for free. What a great story that would be.
You may think the president is clueless about how tariffs work. I think he knows more than you. He knows his base wants the money to go to the U.S. treasury to knock down the debt. It's a brilliant narrative and Trump's tweets control it. He has totally disintermediated the media and tells the story himself, with his own accuracy. His base actually welcomes the tariffs because he sticks it to the Chinese, but because Walmart (WMT) and Amazon (AMZN) are so powerful the worker doesn't even pay more in the end. The retailers eat it. He's giving them some dim sum and they can eat it, too. It's the opposite of Marie Antoinette. Mr. President, google that one.
Why does all of this work? Three reasons.
First, the president is glued to the averages because they are not subjective they are objective. His tweet did not cause the market to crash. Instead, it gave him the head to head trial he needed.
Second we have so little inflation, insanely hot job creation, and a plus 3% GDP when people were looking for 2%.We keep hearing that the economy is as strong as 1969. That's only half the storyline. How about the fact that back then because our government embraced a guns and butter philosophy inflation was 4%? We have a lot of leeway before a chastened Fed raises. If the tariffs slow the economy the president knows Jay Powell will cut.
Finally, the president wants the impossible - not soybean buys but the end of joint ventures for the likes of a Micron (MU) or an American Express (AXP) , one which is already in place and the other which is being held back. You let U.S. companies be unfettered, he's game on. That gesture, hard for a Communist Party to endure because it would mean intellectual freedom which doesn't exist in China. It would stop the rampant theft. It would fulfill a promise that the Chinese made when we let them into the World Trade Organization.
The president has the upper hand. He can now say to the Chinese if they bend a little that he will keep the tariffs on but not raise them. The Chinese will hate it but they could say we kept the tariffs from going higher. We keep hearing from the intelligentsia that Trump has to give up on tariffs in order to get to a win win. But you are forgetting that right now we are in a lose win situation. The base just wants the scales leveled. That's what Trump wants, too, and he won't sign off on anything until he gets it.
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