Markets shed week of gains on Trump’s ‘Tariff Man’ comment
North American markets plunged on Tuesday, erasing nearly a week of gains stretching back to last Wednesday on the heels after U.S. President Donald Trump’s warning to China in a series of tweets that he’s “Tariff Man.”
The Dow Jones Industrial Average closed on Tuesday, down 3.10 per cent after dropping almost 800 points to 25,027. The TSX suffered a similar fate, dropping 1.38 per cent to 15,063 points from its Monday close of 15,262.60.
Both the Dow and TSX saw significant rallies for the first time since early October last week, mostly on the good news of Trump announcing a détente on his trade war with China after meeting with Chinese President Xi Jinping at the G20 Summit in Argentina over the weekend. Trump said after the meeting that China had agreed to lower auto tariffs — though no agreement or communique was signed.
Trump himself dispelled the notion that the two countries had agreed to lower tariffs on Twitter, saying that negotiations with China had begun towards “seeing whether or not a REAL deal with China is actually possible.” He then went on to offer Xi a warning, in the event a deal does not materialize in 90 days.
“... Remember I am a Tariff Man,” Trump tweeted. “When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power.”
Within hours of the tweets being posted, investor enthusiasm about an end to the trade war had vanished and with it, the rare gains made by both the Dow and TSX over the last week.
Trump’s tweets were read out by Jim Glassman, J.P. Morgan’s head economist of commercial banking at a luncheon in Toronto on Tuesday before he described them as being “completely at odds with what my clients and many of us economists see.”
Glassman spoke on the trade war in front of about 200 guests at a Financial Executives International Canada event in Toronto. The economist contradicted Trump’s understanding of tariffs and globalization.
“I think many of us have a different vision of the reality we’re living in than some of our political leaders,” Glassman said. “If someone else gains, we don’t lose.”
Most Asian countries, Glassman said, have a living standard that equals 10 to 20 per cent of that in the U.S. But the “sleeping giants are waking up,” Glassman said, and the emerging markets in the region have the opportunity to expand.
Half of the world lives in Asia, Glassman said, so it should be reasonable to one day expect half of the world’s GDP to come from the region.
As those markets develop, the U.S. will benefit both from the added competition and from having additional business opportunities in those markets. Allowing China to sell its goods to U.S. consumers should therefore only be seen as a win-win scenario, Glassman said.
“When I think about the future ... it’s more tense, more competitive but it means we’re going to have a bigger global pie and we’ll all be benefiting,” he said. “And to me, I think that’s the real story on globalization.
“It’s not about trade imbalances.”