Hopium Floats, and That’s How the Market got High on Friday
Hopium Floats, and That’s How the Market got High on Friday by David Haggith for The Great Recession
So much for the trade war being “good and easy to win.” Let’s be honest. Trump has been grinding away on it for almost a year now, and China has barely flinched in its negotiations. On Friday the tariff war became personal because it will now tap your own budget and every business budget in town.
If you think Trump’s boosting of the amperage means China will settle quickly, you may be one of the people I talked about in my last article, “The Zombie Epocalypse: A River of Denial Floods Markets Everywhere.” Since you are a reader here, however, that is unlikely. In which case, this article is not to restore you sanity but to help you maintain it in an environment where you are surrounded by opiated fools.
To my own surprise, it turned out my last article understated how lulled in denial market madness has become, for Friday yielded a revelation that the Zombie Epocalypse has infected the entire earth when stocks everywhere rose euphorically upon receiving news that the tariff war is fully engaged!
While the US market started off in week-long depression, it ultimately lifted to where the Dow posted its first gain in an otherwise miserable week (+114), though the S&P and Nasdaq barely lifted their heads from their stupor to look around. Bull and bear alike, however, had expected the market to plunge if Trump and Xi failed to find a meeting of the minds, but it didn’t.
Mind you, Friday’s delirium may prove to be transitory. Reality could set in on Monday. At first, people are scared and the market tumbles, as it did at the open; then they see that it isn’t tumbling as badly as they feared, so their drug-addled brains return readily to their former euphoria; and, so, the weekend party begins. However, the hangover and indigestion from the party bombards them all day Monday as they start to think more soberly.
Until we see how Monday goes, we have a market that went from Mayhem to madness on Friday. It fell in May in anticipation of larger tariffs and then rose when they arrived on the hope that they really didn’t. I’ll tell you why that is madness, starting with a layout of the new impacts of the fully engaged tariff war, followed by the reasons that were most commonly given to explain or justify the market’s optimism on Friday, and end with a clear presentation of why those reasons are all a boatload of baloney.
The real impacts of Trump’s tariff war
Let me start by saying, I’m not against fighting China with tariffs, though there was a smarter way to go about this. Cheater China needs to be fought, but let’s not be stupid about the real costs to the US, and let’s remember that soberly that American protectionism helped make the Great Depression what it was.
Contrary to the baloney Trump is blowing out his horn about China paying all of this into America’s coffers, the move to phase two in the tariff wars, which escalates tariffs from 10% to 25% on $200 billion worth of goods imported from China is a tax that falls on American importers, businesses and ultimately consumers.