Broker Check

Donald Being Donald

| July 06, 2018

As I’ve said before, Donald Trump wasn’t my first choice to be America’s forty-fifth president.  Watching the Republican primary debates, I gave him no chance at being the nominee, much less Commander-in-Chief. But, contrary to my greatest fear and today’s headlines, the world has not devolved into a trade war.

While trade war headlines and presidential tweets have captured our attention, nothing of negative substance has upset the markets; the operative word being “substance”.  To be sure, rumors and tweets have worried investors, albeit mildly and occasionally; but I see all this as noisy negotiating tactics on the part of all sides. The fact of the matter is that no one wants a trade war.  Not really, and the president said as much at the recent meeting of G-7 leaders. 

Still, bellicosity is the Trump brand, and I don’t expect his behavior to change.  He believes it’s working, and he certainly has the attention of Beijing, Brussels, and Berlin.  Ditto, Ottawa and Mexico City.  The responses we’ve seen from all sides seem like domestic posturing more than actual negotiating strength.  And, the fact is that America holds all the cards.  Except, perhaps, against Canada and Mexico.  (Canada is totally integrated into the U.S. economy, and the Mexican border is an American vulnerability, though not in the way most people think.)  America has greater economic strength and endurance than all the rest of the world combined.  In short, they need us much more than we need them.

So, I expect Donald will continue to be Donald.  To his credit, he has shown much greater commitment to purpose than I expected, and there is no denying the many benefits of the 2018 Tax Act – it’s moving the needle in the right direction, and substantially so.  I’m also encouraged by his signing of the “Right to Try” law, S.204.  I think we’ll also see many more promising medical treatments fast-tracked through FDA clinical trials, so that everyone can have access, not just those with a terminal diagnosis.  That’s the good Donald.

But, getting back to trade negotiations, I’m actually more worried about the president’s advisor, Peter Navarro, than about the president himself.  For President Trump, as I said, bellicosity is a brand and a tactic; but Navarro, means it.  Thankfully, Navarro’s signature is pretty much meaningless.  Trump has repeatedly shown a willingness to override or ignore his advisors, and mostly to good effect.  At least it seems so, so far; e.g. North Korea.

At the risk of redundancy, President Trump’s behavior is baked in; it’s not going to change.  Given that, if America was weak, I’d worry more about a trade war.  But, we are not.  For example, the behavior of Angela Merkel in Germany should be seen as cozying up to the Russians due to security concerns, rather than as an economic threat.  She knows that without exports to the U.S., Germany’s economy will collapse, and she also knows that the U.S. is not going to provide military security for Europe indefinitely.

The U.S. and China are still kicking the tires of a new trade agreement.  After much back and forth, the Chinese have agreed to “buy more from the U.S.”.  On our behalf, Treasury Secretary Mnuchin said the “trade war is on hold for now”.  Then he announced new sanctions on Chinese telecommunications firms.  Crickets.  Maybe that’s because China understands that the dollar amounts of all this is trivial, especially when compared to the size the U.S. economy.

I hated writing this piece.  Maybe it shows.  Being both critical and complementary of President Trump feels like talking out of both sides of my mouth.  I just thought it had to be done.  We have so much to be thankful for, and despite being a nation sometimes run and overrun by every species of political loon, our future looks brighter than ever.  Until next week,


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The opinions expressed in this material do not necessarily reflect the views of LPL Financial.