Why Trump Killed a Trade War Deal

“You’re fired!”

It’s Trump’s old catchphrase from The Apprentice, his hit television show that aired before he became President. In addition to cementing his status as a celebrity billionaire, it placed his tan faced, golden haired visage smack-dab in the middle of pop culture for nearly a decade.

And as of this morning, he just “fired” something – not someone – else:

Chinese telecom giant Huawei.

According to Trump, the U.S. (nor its corporations) will be allowed to do business with them any longer. The decision to ban the company came after China halted the purchase of American agricultural products – a retaliatory strike against Trump’s September tariff threat from last week.

Moreover, the President is attempting to punish China (via one of their top companies) for allowing the country’s currency (the yuan) to drop to a historic low relative to the dollar.

It’s a maneuver that will likely push both sides of the trade war even further away from the negotiating table. But it’s something that Trump thinks is a necessary evil, as China still refuses to make any concessions.

“We are talking to China; we are not ready to make a deal, but we’ll see what happens,” Trump said to members of the press while departing a fundraiser.

Want more FREE research and analysis on the best “unseen opportunities” in the markets?

“China wants to do something, but I’m not doing anything yet. Twenty-five years of abuse. I’m not ready so fast.”

And based on China’s recent actions – particularly the raising of their currency’s value – Trump believes there’s finally evidence that the U.S. trade strategy is working.

“We called them on manipulation, and they brought their numbers back.”

But to investors, the Huawei ban is nothing to celebrate. The Dow, S&P, and Nasdaq Composite all sunk following the President’s statement.

Because without a trade deal on the horizon, the market has little to look forward to.

Especially in the wake of a puzzling rate cut from the Fed.

That’s not bothering Trump, though, who thinks that the U.S. will be just fine with or without continued discussions ahead of the proposed September tariff deadline.

“We’ll see whether or not we keep our meeting in September. If we do, that’s fine. If we don’t, that’s fine,” he said.

Some analysts don’t share that sentiment, however, and see Trump’s lackadaisical approach as potentially damaging to equities.

“Until we get some sort of tangible answers to what the (Trump) administration is going to do with China, this is going to be an overhang on the market, creating plenty of sharp swings,” said Andre Bakhos, managing director at New Jersey-based consulting firm New Vines Capital.

The “sharp swings” in this case have already happened several times, lending credence to Bakhos’s argument. Some investors might just cash out altogether with a boom-and-bust market repeating its cycle every month or so. Selling off completely until the volatility calms may be a wise decision for those of us that are less risk tolerant.

If that happens? A serious correction could be right around the corner.

One that’s possibly closer than most investors would imagine.

Hopefully, a positive sound bite comes out of Washington (or China) over the next few weeks. Because if there’s one thing we’ve learned in 2019, it’s that “buy (or sell) the news” investing drives the market.

All it would take is a few positive headlines to spur on another historic recovery.

Possibly even just an optimistic tweet from POTUS himself.

But until that happens, we could be in for a few more “down days” as the market wrestles with uncertainty – something it’s gotten very used to over the last year and a half.

[BRAND NEW] Click here to download our research report, "5 Stocks Poised To Soar During The Coming Recession"...


Please enter your comment!
Please enter your name here