Tariff Wars Slam Stock Markets
Weekly Investment Update | By Brian Schreiner
This week’s update is an excerpt of page one from our newly published Quarterly Investment Outlook, available here.
As investors, we are compelled to consider politics. Not the theater but policy, legislation and regulation– everything that can influence the investment markets. Markets don’t care who’s in office. They ignore political gaffes and scandals. They’re driven by profit and loss, growth and earnings, reality and expectations.
Money and emotions can be a costly brew. Successful investors consider economics and politics void of emotion. They call balls and strikes and analyze accordingly because it’s the most profitable approach.
President Trump’s efforts to combat wasteful government spending is an important step in addressing unsustainable federal debt. And, if they are maintained, the tariff increases he announced on April 2nd will be a self-inflicted economic catastrophe.
At this point I would consider recession (two consecutive quarters of negative GDP growth) one of the best potential outcomes from his reckless and non-sensical trade policy.
Free trade benefits everyone. Tariffs distort price signals, leading to a misallocation of resources as capital and labor are directed towards artificially protected, less efficient industries. Consumers are directly harmed through higher prices and reduced purchasing power, while the shielding of domestic producers from foreign competition diminishes their incentive to innovate.
Tariffs impede the benefits of international specialization and the division of labor, ultimately resulting in a lower standard of living. Free trade fosters genuine economic prosperity through market efficiency and voluntary exchange.
The sooner the trade war comes to an end, the better. Political negotiations, which the Trump administration is gambling on, will take time. Meanwhile, the constitutionality of Trump's tariffs will be challenged, but that will take time too. Fingers crossed. α
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Interesting things I came across this week…
Trump's U.S. Reciprocal Tariff Rates for Major Exporters (Visual Capitalist)
What “Liberation Day” Might Mean for Economy & Markets (Apollo)
Vietnam, Taiwan Capitulate: Offer To Remove All US Tariffs, Boost Investment (Zero Hedge)
The Contradictions of Battery Operated Vehicles (Graham Conway)
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