We are now over a week into Trump’s gambit to save the middle class. Here is what has developed.
The same tariffs Trump had telegraphed for months, even helpfully scheduling the day they would begin, apparently took the capital markets by surprise last Wednesday. Just after they were implemented, the stock and bond markets were put into a tailspin, and rampant volatility has been present ever since.
Trump’s stated goal for decades has been to stop America from being ripped off by other countries in global trade. That would mean more working class jobs domestically and more revenue for our country. It also means rewriting a hundred trade deals with countries who understandably have zero inclination to do so. Trump and his advisers knew two things: 1) No country would willingly come to the table to give up their enjoyed trade advantages without some sense of urgency. 2) Nothing creates urgency like pain. Said pain came in the form of a general import tariff of 10% and then, on top of that, additional country-specific reciprocal tariffs. Stock markets plummeted globally. The next day was no better. Trump’s end of week message to the world was that he was now collecting $2B in tariffs per day, and he would be on the golf course if you needed him. Shortly thereafter, the phone began to ring. Dozens of countries were calling to renegotiate. Some, including the EU, offered to drop their tariffs to zero if Trump would do the same. It wasn’t over yet.
A little more pain.
Trump kept the tariffs on a few more days, presumably to convince any remaining skeptics that he was serious. This was no bluff. Trump intended to convincingly establish dominance and show the world America could take the heat better than they could. But he was also very aware that any economic event this impactful on the world was going to affect America negatively as well. The Democrats and their media attacked. China retaliated. Markets continued to tumble. Publicly, Trump stuck to his guns, saying we would have fair trade or onshore everything, financed with tariff revenue, thank you very much.
Then, our 10-year treasury yield began to rise. This was Trump’s pressure gauge. It rose along with economic fears as US treasuries were sold globally, hurting our economy. It was time. Trump’s message had been received, and our trade partners were anxious to talk. Enough was enough. It was time for everyone to exit the sauna, Trump last. Trump suspended reciprocal tariffs for 90 days and the stock market shot up 10% in an afternoon. Interestingly, the world seemed unconcerned, at least for the time being, that China’s tariffs were increased to 125%.
Presently, the 10% general tariffs remain across the board, serving as motivation for partners to negotiate quickly and in good faith. The President’s team is working out new trade deals with the entire world, except for China, perhaps explaining why the stock market’s recovery has been cautious thus far, foreshadowing an all out trade war with the Communist country. Trump has effectively put China in timeout because of their “disrespectful” behavior, which was likely an intended outcome. Now, as each nation in the world negotiates their position in a global reset, China is left out in the cold, a deserved punishment.
A showdown with China may be imminent. China has stolen our intellectual property, sent spy balloons across our country, hacked our infrastructure, manufactured fentanyl and sent it here to kill our youth. They unleashed a virus on the world and lied about it. China is closer to an enemy than an adversary and should be treated accordingly. In addition to the tariffs, the US should seize the farmland they’ve purchased in recent years and auction it to Americans. We should delist Chinese owned companies from our stock exchanges. We should revoke the 300k Chinese student visas and send them home. We’re done pretending that China wants to be a good global partner. They give nothing. They take everything, and we’re done letting them get away with it.
If there is to be a trade war with China, let it happen now. It is better to happen while Trump is in the White House. It is better to happen while new trade deals are actively being negotiated. Severing many of our ties to them would be the most direct approach imaginable to restoring manufacturing in America, while increasing national security. China is a bad actor and has exposed themselves as such. This very moment, pen is being put to paper to determine the new global economic order. If China refuses to change, there are literally dozens of countries eagerly jockeying to take their place.
To be continued…
