A “Coronavirus Trade War” Could Be Here Soon

President Donald Trump and General Secretary Xi Jinping pose for a bitter photo op.

One day up. The next, down.

The market’s been chopping sideways since late April and investors seem frustrated. In response, precious metals are booming. Silver especially, as reflected in the iShares Silver Trust ETF (NYSE: SLV), which opened 4% higher today while the rest of the market sunk.

Today’s morning drop isn’t a direct result of COVID-19, though. Instead, it’s the White House that has bulls feeling uneasy.

The Trump administration moved to block semiconductor shipments to Huawei, the Chinese tech giant that’s found itself at the center of the U.S./China trade war time and time again. Trump wants global chipmakers to cease deliveries to Huawei completely, effectively erasing the company’s entire semiconductor supplier list.

According to Commerce Secretary Wilbur Ross, the official reasoning for the rule change is to “prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests,” as the U.S. believes Huawei has “stepped-up efforts to undermine these national security-based restrictions.”

And while that certainly sounds nice, most folks – including both critics and supporters of the decision – see it as something else:

Revenge for COVID-19.

There’s no doubt about it, China absolutely dropped the ball with the coronavirus. German and U.S. intelligence suspects that Beijing intentionally downplayed the initial outbreak in an attempt to hoard supplies.

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Xi Jinping and his party – the same folks who refuse to acknowledge the Tiananmen Square Massacre – deny any and all wrongdoing.

With past administrations, China would likely be let off the hook for something like this. Now that Trump’s here, though, the Western world seems ready to really “turn the screws” on the pseudo-communist nation.

And honestly, no rational investor would (or should) object to a shift away from China. What they might have a problem with, however, is the timing of it amid a coronavirus-induced recession.

“What are we, crazy?” CNBC’s Jim Cramer asked this morning in response to the Huawei semiconductor blockade.

“We’re not strong,” he added, referencing the April U.S. retail sales report (released today) that revealed a 16.4% drop – the worst monthly loss on record.

“Why don’t we take them on six months from now? Why right now? We need to sell things,” said Cramer.

And from the perspective of hopeful bulls, it makes perfect sense. Playing nice with China, temporarily, is likely the right move.

The problem for Trump is that in six months, he’ll be up for reelection. Going soft on China after it spread COVID-19 to the U.S. could enrage his supporters – voters Trump will be counting on to hit the polls come November 3rd.

Provided, of course, that the coronavirus doesn’t end up delaying the 2020 presidential election.

To analysts, Trump’s retaliation represents yet another “wild card” as the U.S. economy attempts to reopen.

“Given the amount of uncertainty about this crisis that still looms, we should not be surprised by the setbacks we’ve seen in markets this week,” Scott Knapp, chief market strategist at CUNA Mutual Group, said.

The jury may still be out on what POTUS does to China moving forward, but investors can take solace in one universal truth that’s shone through over the last few days:

So long as the Faucis of the world predict fire and brimstone in response to the U.S. reopening, a correction is more likely than a rally continuation.

Especially when those experts occupy positions of authority in national health organizations.

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