The Trade Wars Are Called Off! Then on Again. Then Off Again. What Do We Make Of This?

The White House won’t be extending exemptions for tariffs for steel and aluminum on the European Union. The exemptions were put in place to allow time for the European Union to make a deal the Trump administration deemed reasonable, but alas, they haven’t budged, and so the tariffs are coming. The EU has followed up on this announcement by declaring that they are concocting tariffs of their own on the United States. In typical European Union fashion, the document was bloated, bureaucratic, and long-winded, listing hundreds of U.S. products, from peanut butter and motorcycles, to jewelry and bourbon, all the way to jeans and glass. God only knows how much the un-elected officials in Brussels enjoyed the work of writing out fresh taxes.

Canada too announced it would be trying its hand at the trade wars. The Canadian Foreign Minister said that the country will impose dollar-for-dollar tariffs on the United States, hardly an unexpected gesture.

Mexico chimed in by sharing that it will impose tariffs on pork bellies, apples, and flat steel imported from the US.

So why aren’t markets spooked? Aren’t trade wars “bad”, as we’ve discussed in a previous article?Well, markets have become optimistic that the Trump administration’s bluster is a deliberate thing, used to bring trading partners to the negotiating table ready to make deals to avoid the risk of incurring U.S. wrath. It’s a risky, potentially self-eviscerating tactic, but we admittedly have seen evidence of it paying off. We are closer to peace with North Korea than we’ve been in 60 years, and many credit this fact to Trump’s bluster. Can a similar miracle be pulled off in financial markets and trade negotiations?

Image result for walk softly and carry a big stick

Maybe. The market isn’t quite sure. For now, most analysts are content to let Trump’s administration play this one out and to judge, one way or another, after the waters of international trade become clearer. There is evidence that the forceful gestures of tariffs may once again amount to simple posturing, to negotiate from a position of strength. Trump’s administration has shown a willingness to delay and even cancel tariffs, if the other country can create a deal he deems “fair.”

You don’t make money in the world of investing by pulling out every time the world seems a little spooky. A panic evacuation now could leave you missing out on future rallies; say a rally created when the EU and United States reach a new, refreshed trade deal. For now, its best to get as much information as you can, to wait, and to pounce when opportunity rears. And if the laws and machinations of international trade, regulations, and taxes seem overbearing and flat-out boring to you (I can’t imagine why), know that a Dynamic Wealth advisor is always available to sort out the details for you, and better yet, your portfolio.





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