No Mr. President, Trade Wars Are Not Good
President Trump rattled the markets on Thursday by announcing that tariffs were going to be imposed on steel. Of course, this can encourage other countries to do the same. It makes me a little nervous when our President says that trade wars are good and we will win.
It's Easy." - he tweets.
One thing for sure, other countries don't like is the arrogance of the United States. President Trump is tweeting that arrogance out in big fashion. How do you know it is easy to win when you have never fought a trade war? In fact, I could be wrong, I don't think that a tariff like this has occurred since 1930 with the signing of the Smoot-Hawley Act.
Between 1929 and 1932, the stock market dropped -86% and the country suffered through the greatest economic decline (Depression) of our time. There is great debate as to how the Smoot-Hawley Act effected the great depression. Lets just say that there was not a positive impact.
The biggest concern is how sure Trump is of himself. He is the master of speaking things into existence. He is trying to speak into existence the winning of a trade war. This potentially goes down as the biggest mistake he makes. We are a country in uncharted waters with interest rates and the ongoing effects of a post financial crisis environment.
Do you really think that China is going to bow down to Trump? So let's say we win the trade war. Do you want a ticked off country figuring out how to wage other wars on the US that they can win? There is such a thing called country pride.
Keep in mind that China is the largest holder of US treasuries. We depend on China to buy our bonds. Do we really want to bite the hand that feeds us? We need their money. This has disaster written all over it.