Today, Monday March 12, the Industrial Select Sector SPDR ETF (XLI) fell 1.24%, declining more than either the Standard & Poor’s 500 (down 0.13%) or the Dow Jones Industrial Average (down 0.62%.) I think this is an indication that fears that the Trump administration will still manage to set off a round of trade retaliation to its higher tariffs on steel and aluminum are still with us. Â
So which countries will get an exemption from the Trump administration’s 25% tariff on imported steel and 10% on imported aluminum? If the administration passes out enough exemptions, then what remains will be a tariff targeted at China–and maybe at South Korea.
It’s only March but I’m rethinking my take on 2018.When the calendar pages turned over into 2018, my take on the year was that for stocks the first half would be much like 2017: Despite rising interest rates from the Federal Reserve, there was enough earnings growth to move stocks up even from near record highs. The bond market would be more problematic with those interest rate increases keeping downward pressure on bond prices and upward pressure on bond yields. With inflation still relatively quiescent, though, the downward trend in bond prices would be relatively gradual. It was the second half of the year that investors had to worry about, I thought then.
At a ceremony in the White House President Donald Trump signed an executive order authorizing a 25% tariff on imported steel and 10% on imported aluminum. The tariffs will go into effect in 15 days. Mexico and Canada are exempt from the tariffs for an indefinite time.
The major U.S. stock indexes were just about unchanged at noon New York time today–Standard & Poor’s 500 down 0.02% and the Dow Industrials up 0.25%–ahead of 24 hours or so of high headline risk. Today’s big event–maybe–is the tariff decision that President Donald Trump promised reporters this morning would be forthcoming around 3:30 p.m. this afternoon. Tomorrow’s big news is the release of the February jobs report
The door had barely closed on White House economic adviser Gary Cohn before the winning side in the White House trench warfare on trade began floating proposals to crack down on China. Peter Navarro, who has emerged, along with Commerce Secretary Wilbur Ross, as the point man for the Trump administration’s trade policy, has long been an advocate of an aggressive policy to limit Chinese exports to the United States and Chinese investments in the U.S. companies.
After a quiet Monday (well relatively–since all we had was noise from Republicans in Congress in opposition to President Donald Trump’s plan to put a 25% tariff on important steel and a 10% tariff on imported aluminum and threats from the European Union to restrict imports of U.S. bourbon, Harley Davidson motorcycles, and blue jeans) on the global trade war front, today Gary Cohn, the President’s top economic adviser, Â resigned after losing the tariff battle to trade hardliners
In my daily trawling through the market I come upon lots of tidbits of knowledge that I think are important to investors but that don’t justify a full post. I’ve decided to start compiling these notes here each day in a kind of running mini blog that I’m calling Notes You Need. A representative item resembles this from today: “10:20 a.m.: Shares of soybean giant Bunge (BG) are up 3.75% today on a Reuters report that agricultural investor Continental Grain plans to push Bunge to a deal to sell itself to Archer Daniels Midland (ADM) or another buyer. Continental has increased its position in Bunge according to a filing with the U.S. Federal Trade Commission. Archer Daniels reported approached Bunge about a takeover in January. Last year Bunge rejected an offer from commodity trader Glencore.”
Markets will begin the week focused on figuring out the exact content of President Trump’s tariff proposal, and on the rhetoric from Washington and U.S. trade partners, and on any real proposals for retaliation.
This week investors and traders have been treated to one of the most difficult kinds of stock markets to navigate–the news-driven, trendless market. This week the downward direction of the market has been in reaction to the President’s announcement of tariffs on imported steel and aluminum. Next week the market could reverse if President Donald Trump changed his mind. Or it could sink further–and quickly–if nations such as China and Brazil and nation-groups such as the European Union decided to implement retaliatory tariffs
Anybody who hoped that President Donald Trump would reconsider overnight his decision to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum and risk setting off a global trade war was disappointed this morning when he doubled down in a tweet writing that trade wars are good and easy to win
Chinese President Xi Jinping’s top economic adviser, Liu He, is in Washington for a visit that concludes Saturday. He is scheduled to meet with White House economic adviser Gary Cohn, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. Maybe a solution to defuse what increasingly looks like a potential trade war will emerge from these talks. Watch carefully.
