Trump’s Emotions Over Trade Shouldn’t Influence Investing Decisions

Scanning the news on Monday, or the day when most investors start getting the information they need to begin the trading week, I noticed very little mention of President Trump’s comments over the week-end at the G-7 conference.

CNBC said, “President Trump lashed out at U.S. allies Canada and Europe on trade issues at the G-7 meeting over the weekend.” However, the popular business website failed to say what “lashed out” meant. Other terms used in articles were “escalated criticism”, “turbulent trade talks” and “sparking tensions”.

If you only read Monday’s news, you may come away with the idea that Trump was being belligerent while bringing the world to the brink of a global trade war. So if you missed the news over the week-end, perhaps this may help you create a different opinion of the events.

Trump said trade among the G-7 nations should be free of tariffs and other barriers, in what looked like an olive branch to close allies amid simmering tensions over duties imposed on steel and aluminum.

“No tariffs, no barriers, that’s the way it should be – and no subsidies,” the president said at a press conference.

Trump didn’t elaborate on how or whether the U.S. would reduce its tariff barriers. Instead, he pointed to Canadian duties on U.S. dairy.

“We don’t want to pay anything – why should we pay?” Trump said. “Ultimately, that’s what you want. You want a tariff free, no barriers and you want no subsidies.”

Essentially, Trump offered his opponents exactly what they say they want, knowing full well they don’t dare accept it. It seems to me that he crushed their argument by exposing their hypocrisy.

Unfortunately, it’s nearly impossible to make a rational trading decision on news articles that touch on the emotions of the President and the tone at which he delivers his message. However, all you have to do is look at the weaker Canadian Dollar, rising U.S. Treasury yields and firm demand for risky assets to know that professional investors know that Trump made his point loud and clear and that eventually those nations that seem to say they are all for free-market capitalism publicly then turn around and create trader barriers to the free flow of U.S. goods and services the first chance they get, will eventually cave to the wishes of the President.

U.S. – North Korean Summit

It’s hard to tell what impact, if any, the summit between President Trump and Kim Jong-un will have on the markets. I suspect that if its good news, there will be a rally in the equity markets, but if the new is bad, losses are likely to be limited because the outcome means almost nothing to investors.

We saw this when North Korea started testing missiles. The first test brought a negative response by traders that was eventually absorbed by investors who saw it as a buying opportunity. The next few missile tests saw even smaller reactions in the market.