As we've discussed here in my daily notes, the Trump tariff strategy is really all about China.
And with the reciprocal piece of the tariff plan due to be enforced across global trading partners today, the President made that crystal clear. His escalation tactic forced the world to take a side. And with 75-plus countries reaching out to the administration to make a deal, they've sided with the U.S. consumer.
The de-escalation came today, with the announcement of a 90-day pause on the reciprocal tariffs, except for China.
Stocks exploded higher on the news.
It was the third biggest day (up) for the Nasdaq over the past 25-years …
Interestingly, all of these big 10%+ days for the Nasdaq, in this chart above, were relief rallies in bear markets.
With that in mind, the Trump "escalate to de-escalate" strategy we've talked about over the past few days is successfully isolating China — and it's been quick work.
And among the objectives in Trump's negotiations with global trading partners in the coming weeks and months, may be coordinating a global effort to put China in the global trade "penalty box" – a global retaliation against China's multi-decade predatory economic strategy.
The problem: The Chinese Communist Party won't comply, because they can't. They can't deliver on the demands of fair global trade and generate the domestic economic growth necessary to stay in power.
We saw it in the "Phase One" deal. They shook hands on the deal with Trump in the Oval office in October of 2019. Then they waffled on signing the deal, but ultimately sent the Vice Premier (not Xi) to sign the deal on January 15, 2020. And a month later, a pandemic originated from China. And, not surprisingly, the Chinese government hasn't delivered on its obligations.
So, despite the relief today, we should expect more disruption for markets over the coming months, as the global focus turns to China.
