The Trump Paradox: Tariffs Are Great!

As the EU delegation spearheaded by Jean-Claude Juncker heads in to The White house, most experts weren’t expecting much other than what was already expected, an escalation of the US-EU trade war that has been brewing since the G7 summit and US tariffs on steel imports.

Political analyses say both Trump and Juncker were the stubborn type that wouldn’t back down, and each side were whetting their tariff axes. Several of Trump’s senior economics advisers were saying that POTUS was ready to impose about $200 billion on foreign made vehicles, Trump even tweeted about how great tariffs are.

 

CNBC trade headlined:

“Ahead of Trump meeting, the EU readies new US tariffs worth $20 billion”, citing EU’s trade policy chief, Cecilia Malmstrom’s disclosure to a Swedish newspaper.

Current economic studies and analyses all concur that protectionism is not the way to go for global economic development, surely even the Trump is aware of this, and so is the EU commission, and anyone else worth their economic degree salt. So why does the leader of the US, a country that promoted and help set up the global economy post WW2, keep alluding to tariffs?

Roll Call, a newspaper and online news outlet based in Washington DC writes: “On Tuesday,  the president said his threat to slap tariffs on European-made automobiles is what prompted senior European Commission officials to schedule meetings with him.”

 

Quoting president Trump saying:

“I said, ‘We’re going to tariff your cars.’ They said, ‘When can we show up? When can we be there? Would tomorrow be OK?”

Allowing unintelligent people to make unintelligent decisions is how the zero-sum game is played. I’d bet a lot of people betted against an US-EU trade war peace pact, but a lot of people closely watching as Trump gave Juncker a friendly tap on the thigh also betted for the pact as the Dow Jones Industrial averaged up to green. However that’s just a conspiracy theory hypothesis from a non-betting person. The US and EU markets will probably show investors’ positive sentiments to this easing down of trade conflicts by the two major powers. On the other hand, China, well, will probably not be cheering hooray.

When one looks at America, one should consider this. According to a Wall Street Journal report on a study by the Watson Institute of International and Public Affairs at Brown University, wars in Afghanistan, Iraq, Syria and Pakistan have cost $5.6 trillion since they began in 2001, these estimates include recurring long-term expenses in medical care for veterans and war costs billed by the State Department.

America is actually a belligerent country, making threats is their prerogative, whether it be in trade wars, cold wars, or hot wars. With this in mind, what should the modern investor do when one of the world’s most belligerent nation’s rein is held by one of the world’s most unpredictable leaders? First, maybe look at history, and then look at how the experts look at history.

 

Market Watch report’s, “Diversify,” Nobel-Prize winner Harry Markowitz once responded when asked how investors should approach the stock market. “And if I had to offer a second piece of advice, it would be: Remember that the future will not necessarily be like the past. Therefore we should diversify.”

So maybe it’s time for investors to seriously start putting stock towards the fundamentally sound stocks. Instead of just betting shorts on which way the cookie crumbles, or which direction the herd’s headed. Start going old school and actually study the companies. Figure out which companies mean something to the way of life that you see as important. Look at the demographics, and look at what are the necessities of the generations. Sure stats and aggregated numbers, like engines, are great, but learn to see the wind making ripples on the water as it blows towards you, and know how to ready your sails. Isn’t that what investors are supposed to do?