...and of course we were BLINDSIDED as I did say we would
...as the 'Art of the Deal' proved to be one giant clown show, a con of unprecedented proportions
...Trump paused his tariffs for 90 days for some countries and reducing them to a base 10% but responded with a 125% (from 104%) retaliatory (on retaliatory) tariff on China
...fact is Trump relented, he was the one who blinked but for the good of the world thankfully he did, as he gave credit to Jamie Dimon that something needed to be done.
...Trump first tweeted that it was a good time to buy, could be interpreted as a signal, and then hours later announced the tariff reversal.
...As I said recently, the market is being manipulated and GAMED. And therefore it can't be played.
...But while the market celebrated with perhaps the most meteoric turnaround in US market history with the Dow and S&P500 making a single day gains of +7.87% and +9.51% and Nasdaq +12.16%, the gains will likely be just for the short term and there are good reasons to believe so:
1. The bigger game is the US-China trade war which actually escalated a further notch, and Trump is hoping China will come to the table; China may do so but it would only likely reduce the over the top levy to something that is still high e.g 125% to 60% and China is unlikely to lift export bans, while the 'divorce' is probably irretractable.
2. The tariff reversal is just a PAUSE, and Trump could change his mind again, hence Trump 2.0 is a living policy uncertainty
3. This fiasco would be long term negative for the US - investors and trading nations would be 'once bitten twice shy' and we can expect high levels of mistrust globally of the US and its future moves. As it turned out, it was Japan (not China alone) that sold US Treasuries in a major way yesterday that roiled the Treasury market
4. You'd wonder if there has already been 'something broken' within the US for Jamie Dimon to convince the Prez to retract and if there really is a big problem e.g hedge funds in Treasury basis losses, the market could yet make another turn to the downside
5. The Fed was tipped to enter and 'rescue' the market with a rate cut and perhaps QE, now it could hold its fire, Powell now has the upper hand in biting his time to wait unless we have (4).
..Bessent claims the 'strategy was deliberate'. So I wonder which strategy it is. A strategy to shock and awe markets for insider gains?
Or IF
a. it was a strategy to 'extort' nations to gain something 'phenomenal', a 10% tariff would not cut it, would it? Would EU allow US to take Greenland for a 10% tariff? Maybe they can still push it up again?
b. it was a strategy to raise 'billions and billions' of tariff revenues (to fund a tax cut)- then 10% tariff won't cut it either while large tariffs on China would be much less now as China sells considerably less to US than ever before, and his large tax cuts are likely to be moderated
c. it was a strategy to led other foreign companies to invest and establish production in US, then surely 10% tariff would not be enough incentive, plus Trump 2.0 flip flop policy uncertainty would actually deter foreign companies from doing so
Truth is Team Trump probably messed up declaration a higher than 10% tariff in the first place, and thought they could get away with ridiculously high tariffs.
In the end, the President had to capitulate, yes he lost not win, because the market spoke too loudly and the US was probably a day or two away from a major systemic event like a bond crisis.
A con artist, true and true. This debacle won't go down well for US economy and markets.
America's Brexit moment is unfolding. Once held in high standing, Trump 2.0 has compromised confidence and trust in the American brand. An intangible they duly gave up in exchange for very little to gain in return other than a 'clown show' to demonstrate his might/power to his increasingly wary supporters.
Right now the market is relieved that Trump has backed down. But there could be another round of turmoil after the expiry of 3 months, i.e July when the pause ends. It is good that Bill Ackman's advice was followed. And Trump 2.0 should have done this transition negotiation period in the first place.
Finally, as I opined earlier, the markets would be blindsided by a child's play of Battleship but come to a time over the next 6 months, when Trump's tweet would be impotent to a bear market resumption as it takes a life of its own - and that is when it becomes clear that his policies led to a degradation in earnings growth and a likely recession that may have already been in the works.
