A war on trade is a war on profits and the markets are none too pleased. The White House remains committed to increasing tariffs on goods from countries he believes are ripping America off. Trump’s main target appears to be China after he backed away from imposing additional taxes on Canadian and Mexican products. China has responded with tariffs on 128 US products, ranging from frozen pork to California wine to fruit and ethanol. The Chinese Commerce Minister said it was suspending its obligations to the World Trade Organization to reduce tariffs on 120 US goods.
The markets have responded to these actions with great negativity. Wars, as we all know, have a tendency to spiral out of control and cause much collateral damage. This particular “war” has already gone from a targeted steel and aluminum tariff by the US against China to dozens of tariffs encompassing hundreds of goods between the world’s two greatest economic powers.
Buckle up, volatility is back and with good reason. A rotation into consumer goods and out of industrial goods may be wise as these two industrial titans exchange blows. Nevertheless, economic fundamentals remain strong and we look at market pull-backs as buying opportunities for long-term investors.