Trump’s Trade War With America’s Neighbors Is All Cost and No Benefit
Amid this week’s escalation of a North American trade war, the stock market has been sending a clear signal: Stop doing this.
Stocks rise and fall for a wide variety of reasons, of course, but this week’s downward spiral was largely driven by one man: President Donald Trump. Trump’s announcement on Monday of new 25 percent tariffs on all imports from Canada and Mexico caused the markets to drop instantaneously. The drop continued on Tuesday as Trump vowed in an address to Congress that he’d impose even more tariffs, and over the past two days even as the White House retreated. By the end of the day on Thursday, Trump had postponed tariffs on all goods from Canada and Mexico that comply with the trade deal he negotiated during his first term.
“That move effectively walked back much of the original plan. But the market still sold-off, with uncertainty mounting over the long-term policy,” CNBC reported, noting that the S&P 500 was down 3.6 percent for the week, the Dow Jones Industrial Average was down nearly 3 percent, and the Nasdaq composite was down 4.1 percent heading into Friday morning.
The stock market’s performance is often used as a shorthand for the relative strength of the economy. That’s not quite correct. A more accurate way to think about the stock market is as a reflection of what investors believe the economy will look like in the future—because, at the most basic level, buying or selling a stock is a bet on the future performance of that asset.
This week’s selloff, then, is more than just a reaction to the tempestuous trade policy coming from the White House. It is also a signal that many investors believe the instability (at best) and significantly higher taxes (at worst) will continue to drag the economy for the foreseeable future.
It’s hard to fault them for thinking so. Trump has been obsessed with imposing tariffs for years. He campaigned on a promise to hike tariffs
Article from Reason.com
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