Market Commentary

Why Trump Thinks He Will Win on Trade

It is simple really, the U.S. economy is stronger than most others, especially the EU, Canada and Mexico and growing while others are hitting some bumps. Our economy is much less dependent on trade; at 12% whereas China relies on it and makes up 20% of their economy and 50% of Germany’s the largest EU country.

President Trump thinks he can outlast our trade partners. Also the U.S. is generally much more open with fewer trade barriers according to most economists then other countries so he has fairness on his side and most Americans believe that is the case. He has the common man, and more importantly voter, on his side.

From our trader partners point of view they think Trump will cave in because of this year’s elections. You will note the tariffs they imposed are on goods produced in states that Trump won have elections for powerful republicans.

I think our trade partners may have misread Trump’s resolve. They may want to read some of the books about and by Trump. The ‘Art of the Deal’ will show you that this is how he negotiates and he really does not back down. He will negotiate but he does it from a position of strength and he feels he has the much stronger hand. In fact he makes no secret of it and can’t understand why Washington has been so weak in the past.

Regardless, there will be little damage to our economy and outsize damage to our partners. I would not be surprised that discussions to solve a lot of the issues will start soon or are already underway. If not Trump will likely stick to the tariffs and add more.

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