Trump’s Tariffs Seemingly Spook Stock Market
For the past few weeks, one of the big financial stories has been the tariffs on steel and aluminum that President Trump plans to enact. Those plans, which have evolved since the original announcement and are now set to exclude a few key allies on at least a temporary basis, have helped bring upon some volatility to the market. However it’s a new set of protectionist plans that really seems to be shaking up the market — and not for the better.
The Dow Jones Industrial Average was down more than 700 hundred points on Thursday (with the S&P 500 shedding 2.5% as well) after the President announced a new set of tariffs aimed directly at China. Trump’s plans call for $50 billion in tariffs to be levied against a variety of Chinese products. Naturally China says it will instate tariffs on American exports such as soy beans. With a trade war brewing, some are suggesting the nine-year bull market could be in trouble.
Speaking to the Post, Ivan Feinseth of Tigress Financial Partners said of the market, “Trade tariffs are starting to emerge as a bigger market head wind than originally thought.” He added, “The strong U.S. and global economic and fiscal policy tail winds are starting to be overtaken by the proposed tariffs, the Fed’s softer-than-expected economic outlook for 2018 and the fallout from the Facebook issue.” By “the Facebook issue” Feinseth is referring to questions that have arisen regarding Facebook’s data-sharing practices that have come to light as part of a scandal involving Cambridge Analytic. In a case of compunding concerns, the event has led to speculation that greater regulation is on the way.
Despite the warnings and worries, some analysts insist it’s not time to hit the panic button just yet. ClearBridge Investments strategist Jeff Schulze told the Post, “It’s not the end of the bull market. The U.S. economy is still strong. Global growth is accelerating. The earnings picture is still healthy. This is just part of the correction that started in early February. A longer-term investor would be wise to buy the dip.”
All things considered, Schulze is likely correct in his assessment for now — especially given the administration’s tendency to reverse course on previously announced intents. Moreover, as we’ve noted before, part of what has made these pullbacks and selloffs seem so dramatic is the long rising streak that preceded them. Still there’s no doubt that a trade war with China would have many negative effects on the U.S. economy, making the recent dip look like a prelude to something much worse. As always, we’ll be watching.