President Trump is standing on principle to explain why he seems to have declared a tariff battle with China that's leaving U.S. equity markets as collateral damage.
The President is willing to risk the loss of hundreds of billions of dollars of U.S. stock market value and the jobs of millions of Americans as he escalates a trade war with China because, he says, it's about time the U.S. got around to straightening up trade imbalances that have been around for at least the two previous administrations.
The Dow Jones Industrial Average I:DJI fell 2.2% to about 23,932 on renewed fears of a trade war after Trump directed U.S. officials to come up with proposals to levy another $100 billion of tariffs on Chinese goods. That came on top of threats earlier this week to slap tariffs on about $50 billion worth of Chinese imports, which also drove the markets down until the president's economic adviser said that there was a chance the tariffs wouldn't be put in place after all.
But even Larry Kudlow couldn't stop the bloodbath Friday. That's because the President, after months of touting the rising stock market as the key metric of the success of his administration, said himself that the markets might have to suffer so that the nation becomes greater.
"I'm not saying there won't be a little pain," Trump said in a radio interview this morning. "But the market has gone up 40%, 42%, so we might lose a little bit of it. But we're going to have a much stronger country when we are finished."
Readers won't be surprised to learn that the President's statistics might be a little off. At 23,932 points, the Dow is now up about 20% from 19,799, where it stood the Monday after his inauguration, not quite 15 months ago, and about 28% higher than it was the day he was elected in November 2016. At its peak of 26,616 in late January, the Dow was up 34% from Trump's inauguration, and up 43% from his election. So maybe that's what he's talking about.
Also, that was then, this is now.
It's hard not to think that the President, who has a notoriously short attention span and plenty of other things to occupy his mind, may be trying to distract the media and the nation from other aspects of his governance. Those things include the staffing turnover in the White House, the Cabinet and throughout the administration, concerns over war plans in North Korea, Syria, Iraq and Iran, the sending of troops to guard the Mexican border. But wait, there is more.
How about several lawsuits brought by women who have alleged having affairs with Trump, and an investigation that may establish whether Donald Trump is something ranging from the dupe, to the stooge, to perhaps the witting agent of the Russian espionage services.
All that is a lot for stock investors to assess when trying to judge the effects the Trump presidency is going to have on their money. They didn't get a lot of reassurance Friday from Treasury Secretary Steve Mnuchin, who let it be known there's a "level of risk" that the trade war could worsen. And White House press secretary Sarah Sanders took the President's principled line: "We know there could be fluctuations, but enough is enough."
That will cheer up investors in tech stocks such as Action Alerts Plus holdings Amazon (AMZN) - Get Amazon.com, Inc. Report , Apple (AAPL) - Get Apple Inc. (AAPL) Report and Nvidia (NVDA) - Get NVIDIA Corporation Report , which led the tech sector to the worst-performance among industry groups Friday. Also tumbling were industrial names including Boeing (BA) - Get Boeing Company Report , Caterpillar (CAT) - Get Caterpillar Inc. Report , Lockheed Martin Corp. (LMT) - Get Lockheed Martin Corporation (LMT) Report and 3M (MMM) - Get 3M Company Report , the second worst-performing group. Enough is enough, they may very well be saying.
It looks like Mnuchin is probably right and things will get worse. China's Finance Ministry said the nation is ready for a trade war and will "immediately fight back without hesitation." The ministry also noted that in spite of talk from Washington that the proposed tariffs are simply the first step in negotiations, that in fact there are no negotiations now going on between the U.S. and China.
Now that we know Trump only acts from the purest and least self-serving of motives, the nation can unite behind him to bring fair trade back to the U.S. and deliver the punishment China deserves. In the meantime, the investors who have benefited handsomely from the Trump trade so far may have to take their knocks as well, along with the techies in Silicon Valley and the pig farmers in Iowa.