As we write this, futures are down about 530 Dow points this morning as China decided to take retaliatory measures against the Trump tariffs. Of course it is still early. Trump can just send out a tweet saying “Just kidding!” and turn futures around.
We repeat many of our thoughts on tariffs.
Tariffs are a tax. Guess who pays all taxes.
Tariffs are inflationary. Guess who ends up paying all that inflation.
Tariffs are bearish.
Tariffs are political. Not a reach to figure out why the tariff on soybeans and airplanes. China knows what states soybeans come from.
For every action, there will be an equal and opposite reaction. (We have used this line several hundred times on radio and TV.) Did anyone think China would not hit us back dollar for dollar?
Countries will act in THEIR OWN best interest…not ours.
As we have stated, nothing good comes from a trade war (and we still believe one won’t occur but this morning does not make us feel better). There are many tangible negatives but also the major intangible of uncertainty. If the powers that be want to put uncertainty into the economy and markets, this is how you do it. And keep in mind, the big stuff hasn’t even started yet.
We continue to be of the opinion that President Trump is barking in the wrong alley, barking up the wrong tree, just barking wrong. Instead of attacking the trade deficits, he should be addressing our own home and our massive, gigantic, gargantuan, monolithic, out-of-control debt and deficits. Of course, the president, along with McConnell, Ryan and a frothing-at-the-mouth Democrat party just upped yearly federal spending which upped yearly debt which upped our deficits. AND NO ONE GIVES A CRAP.
Remember, so far, it is just mostly proposals. We hate to see what happens if enacted.
In the pre-market (things can change before the open), all the gains of yesterday have been given back. If we open at these levels, we will again be in and around very, very, very important longer-term support levels.