Just as I Predicted, The Trade War Panic Is Coming to an End On Monday, we woke up to news that the U.S. and China are suspending the reciprocal tariffs that had Wall Street – and the financial media – in a full-blown panic just weeks ago. Wall Street let out a collective sigh of relief and sent stocks surging. Investors poured back into the stock market, sending the NASDAQ up 4.4% on Monday, and the S&P 500 and Dow up 3.3% and 2.8%, respectively. So, in today’s Market 360, let’s review the U.S.-China trade truce – and why it’s such a big deal. Then I’ll show you how to position your portfolio for what’s coming next. The U.S. and China Call a Trade Truce “A very robust and productive discussion” is how Treasury Secretary Scott Bessent described the U.S.’s trade talks with China over the weekend, as the two countries covered fentanyl, more U.S. exports to China and tariff reductions. The U.S. and China ultimately agreed to a 90-day trade truce. While the two countries will continue negotiating over the next three months, both agreed to lower current tariffs. The U.S. lowered tariffs on Chinese goods from 145% to 30%, with the lower rates effective Wednesday, May 14. China dropped its tariffs on U.S. goods from 125% to 10%. The U.S.-China trade truce also comes on the heels of a new trade deal between the U.S. and the U.K. Last Thursday, the Trump administration announced a comprehensive trade deal with the U.K. that lowered tariffs on British imports to the 10% baseline tariff. The U.S. plans to export $5 billion in goods to the U.K., including agricultural products, ethanol and machinery, and the U.K. can export 100,000 cars to the U.S. at the 10% tariff rate. The U.S. also eliminated tariffs on steel. President Trump stated on Truth Social, “Because of our long-time history and allegiance together, it is a great honor to have the United Kingdom as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!” The U.K./U.S. trade deal is also meant to apply more pressure on the European Union (EU). The U.S. actually runs a trade surplus with the U.K., but it has a big trade deficit with the EU. The Trump administration is striving for the EU to onshore more production to the U.S., as well as lower its tariffs. But the EU is being difficult, with more retaliatory tariffs on U.S. goods if negotiations break down. The Panic That Never Should Have Happened Now, when the tariff war between the U.S. and China began in April, I predicted that President Trump was just using tariffs as a negotiation tactic to make a better deal for the U.S. However, many people thought the sky was falling. The headlines were nothing short of hysterical: “Trump’s trade shock hits the global economy” – Financial Times “Trump’s tariffs risk a global trade war” – CNBC “Trump trade war with China revives recession, bear market fears” – Reuters “Wall Street and the dollar plunge as investors worry about Trump’s trade war” – PBS NewsHour “The absurdity of Donald Trump’s trade war” – Financial Times But I wasn’t worried. In fact, I am on record as saying that most reciprocal tariffs would not go into effect, since most countries would lower their respective trade barriers and promise to buy U.S. goods. The primary target of the tariffs is China. What’s more, I said that the 10% “baseline” tariff would stick. That’s because we have a massive underground economy in the U.S. We need a way to close the gap with our runaway deficits and national debt. But enacting a Value Added Tax (VAT) is untenable, so this is the next best option. Moreover, I said that I think the dollar will eventually get strong enough that we won’t even see the effects of the 10% baseline tariff. Now, I have also said from the get-go that the reciprocal tariffs were intended to be a starting point for negotiations. The goal? To get other countries to drop their barriers or move their production to our shores. And if a country wasn’t willing to play “let’s make a deal,” then there would be consequences. | Recommended Link | | | | AI is creeping into every aspect of our daily lives… According to billion-dollar fund manager Louis Navellier, it’s never been more important to AI-proof your wealth. He lays out three simple steps to take ASAP in his new video. Click here to watch it now. |  | | The reality is that there is a legitimate beef to be had with some trade imbalances. For example, did you know that, as big as we are agriculturally in America, we have been a net importer of food for the last three years? Or take, for example, the fact that before all this began, the European Union charged a 10% tariff on American cars imported into Europe. The U.S., on the other hand, charges 2.5%. I find this fascinating, and I could go on. Yet you rarely hear anyone discussing this in the media. Why the European Media Got It So Wrong This brings me to another important point. One reason the negativity got so out of hand? The media. Specifically, the European media. During the “tit for tat” phase of the tariff saga, every week seemed to start the same way. The European media lined up to blame President Trump for all their problems. For example, my friend, economist Ed Yardeni, recently highlighted four covers of The Economist magazine – all negative on America. And I can tell you The Financial Times is no better. 
In my four decades in this business, these are the sort of contrary indicators that often signal that it’s time to buy, folks. I should add that both of these publications are based in Britain. Now, I’m sorry half the population over there can’t pay their utility bills without government subsidies. But that’s their problem – not ours. Just because they’re miserable doesn’t mean we should be miserable. Obviously, I realize that many folks are not fans of President Trump. And I will acknowledge that he can be a bit erratic. But the ultimate goal of all this is – and always was – to not only have free trade, but fairer trade. I’m very bullish on America, folks. We simply have a better model – no matter who we elect. We’re food and energy independent. The world economy is shrinking. Only America, Brazil and India are growing. And if you needed any more proof that the fear was overblown, just look at this morning’s Consumer Price Index (CPI) report. It showed consumer prices rose just 0.2% in April, and only 2.3% over the past year – the slowest pace since early 2021. This is more confirmation that the Federal Reserve is fighting a mythical inflation boogeyman that doesn’t exist. (I’ll have more to say about this in a Market 360 later this week, so stay tuned.) Now That the Panic Is Fading, Here’s What Really Matters Now that the tariffs are off the table, suddenly, the same folks who were calling for a global meltdown are nowhere to be found. This is why you shouldn’t allow yourself to get distracted by all of the noise or invest based on headlines. Just because the mainstream financial media says the sky is falling doesn’t mean it is. And the fact of the matter is they’ve been focusing on the wrong story altogether. Because it’s not tariffs that could send the U.S. economy spiraling, it’s something else entirely. You see, we are racing towards a moment in American history I call The Economic Singularity. This is when traditional human work becomes economically irrelevant. In its place will be AI, owned by a small group of tech companies and their investors. We’re approaching this moment faster than you think, so you need to understand this reality now, before it’s too late. Because those who own these tools will prosper. Everyone else risks getting left behind. That’s why I’m breaking my silence in a special presentation – and I urge you to watch it right away. Sincerely, | .png)
.png)
Post a Comment
Post a Comment