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Mission Accomplished

Trade wars lead to falling stock prices. And prices only go back up when investors believe the trade war has been called off.

What a glorious, gaudy, giddy war! While it lasted…

We refer to the ‘Great Trade War’ started with horns blowing and flags waving by Donald J. Trump. All the thrill of battle with no dead bodies. All the righteous excitement of a Worthy National Cause, good vs. evil…right vs. wrong...and all we stood to lose was money.

It was billed as the trade war to end trade wars...with a Liberation Day that was to usher in a new Golden Era for the US. From now on, the playing field would be level... and we Americans would be winners again.

We imagined the great victories — over China, Europe, Vietnam, who had been ‘ripping us off’ for decades.

And then there would be a victory parade, perhaps down Broadway in Gary, Indiana...

POTUS could announce ‘mission accomplished’ on the deck of a cargo ship, idled off of Long Beach, and then hand out Trade War Service medals to Pete Navarro and Scott Bessent. (The military humor site, Duffel Blog, reports that the medals may be delayed because of Chinese retaliatory tariffs!)

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Like all the best wars, America’s Trade War was intended to be short, sweet, and victorious. “Trade wars are easy to win,” said America’s leader. It was supposed to be only a few weeks before the enemy surrendered and the fentanyl, illegal immigrants, and cheap (unfair!) products stopped flooding over the border...with new factories popping up all over America.

But the trade war went bad, almost from the first day. The war aims were never clear. Drugs? Immigration? Manufacturing revival? Revenue raising? Were we trying to right wrongs... or get rich?

What exactly were we trying to do?

At first, tariffs seemed like a goal in themselves. They would be ‘reciprocal’ — erasing many years of unfair, unbalanced trade.

But hardly had the ships appeared on the horizon when the Liberation Day landings were aborted. A pause was announced, giving the enemy a chance to ‘negotiate.’ Maybe they could just buy more tanks and airplanes from US industries? And maybe we’d call off the war? They were lining up to kiss Donald Trump’s derriere, we were told; was that the goal? They had to do a deal, POTUS explained, in order to get access to US consumers.

But they already had access…and we already had deals in place with all of them. Was the idea to reduce the current trade-weighted tariff average of 2.2%...to 2.1%? “No,” said trade advisor Pete Navarro. Even if the tariffs went to zero, that wouldn’t stop the trade war.

As near as we can tell the real goal was simply to bring trade under political control... with the ‘deals’ controlled by Donald Trump himself.

Apple, Nvidia, and other companies got the message. They lined up.

Now it was Americans who were kissing the president’s duff. CNN:

It started with iPhones, which under Trump’s 145% China tariffs were set to more than double in price. But Apple CEO Tim Cook called the White House and soon secured a reprieve, the New York Times reports.Other businesses took note, and soon CEOs and lobbyists were scrambling to make their case for why their burning house also deserves some water.On Monday, the CEOs of Walmart, Target, Lowe’s and Home Depot descended on the White House to discuss tariffs... scrambling to get the president’s attention.“There’s only one person that can really authorize that exemption and that’s the president,” a business representative with close ties to the Trump administration told Politico. “So if you’re not a company that can whisper in the president’s ear or make the trip to Mar-a-Lago and do it persuasively, then you’re sort of frozen out of the process for now.”

In his press conference on Tuesday, the president said he wasn’t going to play hardball with the Chinese. Instead, he was going to be ‘nice.’

Why?

Because, while all of this puckering up was going on a disturbing new insight had reached the White House. Trade wars lead to falling stock prices. And prices only go back up when investors believe the trade war has been called off.

Trump insisted that he was ‘bringing China et al. to the bargaining table.’ But now it was actually Trump himself who needed a deal.

The deal-maker had maneuvered himself into a losing position. The only way he can keep the stock market from collapsing is by abandoning his own trade war. The Wall Street Journal:

“Another harsh reality is that China called Mr. Trump’s bluff and seems to have won this round.”

In short, the war is over. Now Team Trump is making deals. Like the deal they negotiated with Canada and Mexico during his last term, trade will go on much as it did before. And — despite his blustery blah blah — it is Trump himself who will bend over and pucker up.