We have seen some wild moves up and down in the stock market since January and a lot of the news around these moves has coincided with announcements by the Trump administration about tariffs.
Out of 104 economists surveyed by Reuters 80% of them said that tariffs would harm the US economy. The rest said they didn’t think they would have an impact, but not a single one of them believed they would help.
Despite this political support for tariffs has been on a regional basis, with politicians in both parties in rust belt steel areas being the bastions of support.
Now the first big tariff event came on March 1st when Trump held a photo-op with steel barons inside the White House and declared that he wanted to launch steel tariffs against the rest of the world.
The DOW fell hard that day and tariffs news dominated the media in the weeks that followed.
The market then went back up into the end of March and a lot of TV talking heads argued that the tariffs weren’t real and that Trump’s talk was all just part of a bigger negotiating tactic and a lot of Trump administration figures made that claim too.
But as time has gone by we can now say that the tariffs are indeed real and that President Trump is ready to wage a real trade war against the rest of the world.
Trump launched tariffs on Canada the other week and this past Thursday announced a $50 billion tariff package against China.
China in turn said they would put tariffs on Soybeans to hurt US farmers and the DOW dumped on Friday.
And Boeing in particular got hurt as its airplane sells to China are now in danger.
Las year Boeing generated 17% of it’s revenue from China.
So will more tariffs help the US economy?
No, but it will help some of Trump’s biggest donors like Wilbur Ross and Carl Ichan make more money and they will help Trump hold his voter support in states like Pennsylvania and Ohio.
However, I believe that the tariffs will have little impact on the stock market for the short-term.
At least for this summer.
The reason why is that we are now seeing a very narrow leadership rotation into big cap tech stocks inside the stock market.
I’m talking about stocks like Amazon, Google, Facebook, and Microsoft, and so on.
Most of these big cap tech stocks won’t be impacted by tariffs at all and the stock market leadership is now in these stocks. So they can provide strength to the market for the next few weeks to help cushion down days this week and provide earnings excitement next month.
Where things go by the end of the summer it’s too early to tell though.
But going into July earnings season you can look for big cap tech to help minimize any impact more bad tariff news has on the financial markets.