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Trump’s Trade War Torpedoes Growth

October 2, 2019

We reap what we sow.  And that is making investors, and those who have a stake in the stock market, feel dizzy.

Stocks slid again today, continuing the unease that investors feel after assessing new evidence that the world’s industrial sector is weakening in the face of  Donald Trump’s trade war.

The S&P 500 dropped 1.8 percent, its worst day since late August. The Dow Jones lost 494 points. Stocks in Europe tumbled.  Let us be honest and just say the world is trembling in anticipation of what is coming.

The selling this week began after a report on manufacturing activity showed that factory output in the United States slowed in September to levels last seen at the end of the financial crisis a decade ago.   That alone was unsettling.  Added to the manufacturing concern was the quarterly corporate reports which underscored concern in the auto industry.

The data was a fresh indication that the trade conflict between Washington and Beijing is chipping away at the industrial base in the United States.  The damage of the trade war has already impacted factories in Japan, Germany, and cleary in China.

Trump has long told the gullible in the United States that trade wars are easy to win.  So I ask those supporters of Trump if we are winning that war?

For long term investors, these bumps and blips can and will be weathered.  But the larger concern is the plight of the national economy due to reckless and needless trade wars.  While China and the U.S. at times indicate there would be future trade discussions, that is not enough to soothe markets or allow producers to feel any sense of calm concerning the future fate of their businesses.  There is now a hot trade war underway.

There are many ways to view this mess, and ponder how we got here, and how to back away from the cliff.

One matter I have long argued on this blog, as a free trader and internationalist, is that what is happening now could have been handled far differently had we not precipitously and stupidly withdrawn from the TPP.  That was one of the first major bone-headed decisions from the Trump White House.  Had we not jettisoned ourselves from TPP we would be allied with many Pacific Rim countries that represent a larger fraction of Chinese trade.  Now we are waging this battle alone.  Needlessly so.  Let me repeat, TPP was a good plan.

The TPP treaty addressed the issues of intellectual property rights–one of the pressing and nettlesome issues with China–along with foreign companies’ access to markets without resorting to tariffs.   That Trump trashed TPP in favor of 19th-century tariffs is nothing short of the most unenlightened and backward thinking imaginable.

This is what happens when one elects a severely under-educated president.  Thanks, Trump supporters, for the downturn for investors!

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