Market Briefing For Tuesday, March 6
Tariff threats as a negotiating tactic for a better NAFTA deal was my suspicion of what the President is trying to achieve. Know that finalized aspects are 'somewhat' improved with regard to food and dairy; which is a significant component of the trade relationship with Canada. Now that seems to be a 'done deal', and hard to say if it would have been derailed by the seemingly heavy-handed Trump approach to nudge things along.
(Once again we have a snapback; but beware of its sustainability.)
However as I have mentioned, Canada is 'not' a low-cost producer like a slew of others (Mexico included, but of course many Asian countries). At the same time expecting countries to 'cave-in' during negotiations right in the middle of formal trade talks, kind of compels stiffening-up .. even if (as is the case) most of these partners need us more than the reverse.
Yes, it's very much triggering political disputes such as Speaker Ryan's threat to turn Congress against Trump's tariff proposals; while for sure the idea to turn the trade relationships to a 'fairer' status via-a-vis the US is certainly right at the core of why Trump ran for the Presidency. It's one of my major peeves with governance from both parties for 3 decades as you know; ever since my first Keynote speech at the American Footwear Assoc. in Boca Raton in I believe 1976. (I was a mere child then, but did realize if politicians wouldn't toughen-up trade everyone would be forced to outsource, and I had major manufacturers in tears at the prospect.)
Calling a Spade a Shovel
As a result of 'no action' in Washington; they invited me again to speak .. that time in Palm Springs, and we all realized the folly going on in DC. Sure stocks went up; we were all bullish; profits jumped; but the Nation's industrial might really was decimated from that era until present revival efforts; that somewhat kicked-in after a forecast 2007-'08 'Epic Debacle'. Technology saved a lot of the US; but other than that Trump is the first President to 'call a spade a shovel' if you will; and attack this head-on.
(Ironically The Economist omitted monetary and currency concerns.)
And now; we are so far down the rabbit-hole with globalism, that merely trying to flatten-out currency-related variances meets stiff resistance. Of course I realize that 'old industry' alone won't solve our revitalization; so I don't disagree with the breakdowns of how jobs might be lost perhaps in the short-run. However I think most underestimate the clout the USA still has. It's not that Trump expresses much correctly; but on this issue he has it right; just that the timing suggests his trade negotiators haven't been successful, so he's pushing things along (which might not help).
In sum: Monday the US NAFTA negotiator said things were not coming to an agreement; and that Mexico was more cooperative than Canada as I recall hearing. And that this might not end successfully or fail; but simply persist for several more weeks. I bet the market will love the interim and persistent volatility associated with alternating stories along those lines.
Of course maybe there will be a breakthrough. Also I think the market is showing the attention span of a 2 year old, with wild flailing moves every which way as far as what observers see; but technically developing the pattern that could prove to be a more significant distribution over time. I am aware that others say bears are wrong and we have another year of upside. However we're not bears; properly called the rally 'if' Trump won as you know; and we are calling for corrective action within context of a very long-term cycle that could have years to run IF trade come together and IF we don't get monetary moves that trigger an equity bear while we see a bond bull... something that is trotted-around out there.
Bottom line: what's remarkable for markets has been these alternating swings with such ambiguity in policies, or certainly how they seriously could impact many projections regarding so-called synchronized global recovery.
In fact (though few will say it); you really need better trade deals to give a fairer shake to American workers; or eventually US degradation persists in a lot of areas that have contributed to economic divisiveness which is arguably most significant in the so-called social divide in this country. It's amazing how good jobs and higher income resolves many social issues; and that's not news. It's been true throughout history. Of course the United States nobly helped the post-war world; and had we put a time-limit on that (my argument in the 1970's) both Asia, Europe and the USA would be trading mightily; only our infrastructure wouldn't be the worst of the lot; and hardly a Dollar in the pot, to fix it all.