Mr. Trump just opened a new tariff front with a 5% tariff threat on Mexico by June 10th with a threat to escalate it to 25% by October 1:
“Tariffs will be raised to 10 percent on July 1, 2019. Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019.” https://t.co/NVbbgfxFcu
— Sven Henrich (@NorthmanTrader) May 30, 2019
Yea, that’s not gonna happen.
Why? Because economics and politics.
On the economic front it would push the US into a full blown recession ahead of the 2020 election (which some argue may happen anyway), but this action would seal the deal.
For one Mexico is not a small trading partner:
Add the existing pressure (and perhaps expanding pressure) coming from tariffs on China and threatened retaliatory measures and you end up with a price pressure spiral on consumers and businesses nobody will stand for.
And that brings us to politics. It’s all fun and giggles as long as nobody gets hurts but even the Republican donor base is likely to run out of patience way before a 25% tariff gets implemented.
At the end of the day political conviction ends with the pocketbook and a 25% tariff on Mexico would hurt a lot of Republican corporate donor interests.
The administration will get clobbered from within. And that pressure may begin today. Wall Street is not impressed. And neither is corporate America. And neither will American consumers nor the Mexican government which has been negotiating a USMCA deal with the US government.
So while Mr. Trump may be playing bravado to his base this opening of a new tariff war front will find little support anywhere and is not going to reach its threatened conclusion.
In other words: 25% tariffs on Mexico? Yeah, that’s not going to happen.
We’ve been hearing “yeah, that’s not going to happen,” since August 2015. Wrong every time. Why would this be any different?
I am bearish for the long term….but it looks like in one month the market sentiment has become quite negative…
Once a narcissist decides to punish their opponent, they often unconsciously punish themselves in the process with reckless abandonment. At some point, Congress will step in to limit the damage. At said point, consumer and investor sentiment is likely to have changed and 2020 will be the year of the next “Great recession”, barring another credit impulse (like 2012, 2015/2016) by the global central banking cartel. Yet why would the cartel bail out their primary critic in time for the next election? My bet is the fed(s) magically remain sidelined until winter 2019/Spring 2020 as Tariff Man has provided ample political cover for a 2020 recession. Can you see it now, “2021 Time Person of the Year Jerome Powell”….the Hero who “SAVED” the economy with negative interest rates, $7 Trillion in QE, and direct corporate stock purchases???