"Barely a Chicken" for Wall Street: Trump's Nervous Bluff in the Trade War
Trump spurs fear among Wall Street leaders, perceived as a timid fowl by them.
By Hannes VogelMore Info (Facebook, Twitter, Whatsapp, Email, Print, Copy Link)
Wall Street hardly takes Donald Trump's constant bluster in the trade war seriously. Investors now predict Trump will always cave, creating a significant risk.
A false alarm, indeed! Donald Trump has saved the world – again. "Our deal with China is confirmed and awaits a final signature by President Xi and me," Trump announced on Truth Social this week, claiming a preliminary framework agreement in the trade dispute with China. After two days of marathon negotiations in London, both sides returned to the 90-day tariff truce they agreed to in Switzerland in May. There was a possibility that the agreement could derail, and the colossal tariffs of over 100% imposed by Trump in April could soon apply between the world's largest and second-largest economies.
Back to square one, again. As with the beginning of Trump's trade war, a familiar pattern repeats: First, Trump rants and bellows threats. He claims victimhood in global trade, and threats obscene tariffs. Ultimately, he concedes and announces a deal, even if it lacks substance. "Escalation to de-escalation" is what military strategists and political experts call this strategy. On Wall Street, it's now known simply as "Trump caving every time" (Taco): Trump always caves – like a stammering chicken.
Taco: Skittish Stocks The Financial Times columnist Robert Armstrong coined this term a few weeks ago due to Trump's constant bluffs becoming a trend. As a result, the internet booms with Taco memes. Innovative songwriters have even crafted Taco songs: "First, he screams loud and then he softens up, the market's used him and takes off," some clever minds have penned. "Bet when the prices plummet and wait for the prices to soar, he comes back faster than a bride who flees."
Traders have long since incorporated Trump's theatrics into their calculations. If you dare to venture on Trump's tariff rollercoaster, you can reap substantial profits. The investment bank Nomura has calculated that since February, a straightforward wager would have netted 12 percent in returns: Every time Trump escalates verbally, wager a crash of the S&P 500 with futures – and then buy them back five days later. That is roughly the timeframe Trump has adhered to so far. "Buy the dip," purchasing a stock after a setback, has been a long-standing stock market strategy. In the age of Trump's trade chaos, it's the only tactic the markets hold onto to cope with the constant twists and turns of the U.S. President. With analysts believing Trump has overextended his hand against China, there is a strong likelihood that this will continue to work for a while.
Economy USA's Hunger for Rare Earths USA and China Agree on Trade Framework The trade war is increasingly hurting American exporters, driving up costs, and jeopardizing store shelves in the United States. Even Trump's supporters start to feel it in their wallets. The World Bank has severely revised its economic growth forecast for more than two-thirds of all countries, and the slowest growth since the 2008 financial crisis looms. There's too much at stake for Trump to stick to his threats. Moreover, China has discovered a robust lever against Trump: rare earths. Due to critical minerals, American automakers are increasingly pleading with the White House to negotiate a deal with China. They were also the reason for the latest round of talks in London. Production lines in certain American factories have already ground to a halt due to Chinese export restrictions on these irreplaceable commodities, from which high-tech magnets are made. And for the foreseeable future, the U.S. cannot contest China's export restrictions – no matter how loudly Trump spouts and blusters.
Economy Fragile Truce with Beijing The truce with China is extremely fragile, though. The question remains: What exactly do we get that we didn't have before?" asks the leading analyst of a libertarian think tank in the newspaper. "This deal suggests that there was never a real plan," implying that this pattern repeats just as it always has. Trump's absent strategy fosters constant uncertainty, which could potentially paralyze the markets. While traders may laugh at Trump, they may also underestimate his destructive potential.
- Donald Trump
- Tariffs
- Trade Conflicts
- Stock Prices
- Wall Street
Additional Tips
To weather the storm of Trump's trade policies and related market volatility, try diversifying your investments across asset classes and geographies, focusing on low-volatility and recession-resistant stocks, and consider the benefits of gold, international stocks, and bonds as a mix of both safe havens and strategic plays. These strategies will help you reduce your exposure to the risks associated with Trump's trade actions while maintaining the potential for steady returns.
- The various investment strategies suggested for weathering Trump's trade policies involve diversifying investments across low-volatility and recession-resistant stocks, considering gold, international stocks, and bonds as safe havens and strategic plays.
- Amidst the ongoing trade dispute and its impact on Wall Street, the term 'Taco' has emerged in the financial community, symbolizing Donald Trump's habit of bluffing and ultimately caving in during trade conflicts, akin to a chicken.
