Another pothole for the markets is coming up as the White House economic advisor, Gary Cohn, is resigning in the wake of losing the tariff battle:
President Donald Trump’s top economic adviser Gary Cohn is resigning, the White House announced on Tuesday.
Cohn, who had been rumored just weeks ago as a potential next chief of staff, will leave the White House in the wake of his fierce disagreement with the President’s decision to impose tariffs on steel and aluminum imports. Cohn is expected to leave in the coming weeks, the White House said. …
Cohn’s resignation sounded alarm bells in establishment circles in Washington and on Wall Street, where many viewed the former Goldman Sachs executive as a steadying influence on economic policy inside the Trump White House. His departure, combined with Trump’s recent moves to recommit himself to his nationalist trade agenda, raised questions about the direction of the Trump administration and sent Dow futures plummeting 300 points.
“Wall Street won’t be happy,” said a senior Republican who has worked both at the White House and in finance. “We knew he was hanging in by a thread, but it is terrible news.” [CNN]
Kevin Drum’s graph of banking profits, indicating those onerous regulations aren’t all that onerous.
I very much doubt this will trigger any major mudslide. This isn’t like the crash during the Great Recession, as that was brought on by a basic flaw in our economic rules, and while I do have concerns with continued moves towards loosening the banking regulations, I don’t see that loosening as provocational to a major stock market crash. Yet.
I see this as understandable investor jitters, possibly compounded by algorithmic trading facing a scenario more or less unexplored and possibly even unforeseen by the authors of those algorithms. There may be some flash crashes in the coming days, some weird ups and downs, as the investment community readies itself for Cohn’s successor and how the tariffs will be handled.
Unless, of course, the tariffs aren’t implemented. Trump is trying to use them as a hammer on NAFTA, but I don’t know if Canada and Mexico are bowing to the pressure. Given the humiliating nature of this approach, they may firm their upper lips and soldier on. In fact, I expect it. Handing Trump a real victory when he uses such a crude approach would only encourage him to continue, and that is not to the long-term advantage of most nations.
Fasten your seatbelts.
