The Fear Of The Unknown

It’s sort of a law of the markets that investors in big companies, as well as the medium sized companies, along with positive potential, want to see predictability in the business of their favored companies; it lets the investors sleep at night.

President Trump’s announcement of tariffs on steel (25%) and aluminum (10%) may have just taken that quality away from businesses yesterday. It’s not that tariffs may be enacted, but the manner in which they were announced – uncoordinated, without consultation with industry or Congress, but simply as a matter of arbitrary fiat. President Trump may claim, even justifiably, that he is fulfilling a campaign promise, but President Trump is notorious for making many claims, mostly false, to justify his actions. He is in the process of proving, however, that is willing to enact tariffs on the spur of the moment.

And the result of these tariffs? No one knows for sure. Members of his own party aren’t happy. Certainly, foreign powers, from adversaries to allies, are not happy, as CNN makes clear:

The EU and Canada both expressed their opposition to the new tariffs shortly after they were announced, and said they weren’t afraid to retaliate.

“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” European Commission President Jean-Claude Juncker said in a statement.

Predictably, President Trump is embracing the chaos:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

It’s interesting how he tries a sleight of hand – moving from a product to a country. But will he continue? I’ve noticed Trump likes to throw proposals out to see what happens and then withdraws them – or pretends he never made them – in favor of another. So these tariffs are not a done deal.

However, this has to upset the jittery investor, as we’re already seeing in the market behavior of yesterday and, so far, today – down, down, down. And don’t forget the algorithmic traders whose algorithms may not understand how President Trump operates, which is easy to believe as most of the United States doesn’t really understand him, either.

Regardless of whether or not these tariffs are actually implemented, the markets have been put on notice that President Trump will meddle in the national economy as his whims takes him – and that investors should beware.

I anticipate a lumpy ride until we toss him out.

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About Hue White

Former BBS operator; software engineer; cat lackey.

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