The Ultimate Lesson In This Morning’s News

Looks like NAFTA (under a new name) is going to survive after all. Canada and the U.S. have reportedly come to terms that will have the trilateral agreement survive, after a fair bit of tweaking. Not to throw a wet blanket on the good news, but, well, looking into the details, let’s just say it’s a real head-scratcher. 

Okay, enough with the negativity, the market absolutely loves it! As I type the Dow’s up 238 points. The message, as it has been all year when it looked like trade deals would be saved, being that trade is good, tariffs are bad. Now, perhaps contrary to that thinking, we can expect today’s “win”, added to the recent “win” with South Korea, will have pundits predicting that the U.S. can now play yet more serious hardball with China. That makes sense, and it wouldn’t surprise me if there’s a tweet storm validating that view a coming. However, in the grander scheme of things, the ultimate lesson this morning lies in the market’s reaction: And I don’t mean that the resiliency of the U.S. market gives the Administration the green light to go deeper and longer into protectionist territory against China (as the Administration seems to believe), but that the market — as long as general conditions remain bullish — will aggressively welcome a trade war treaty, particularly one with China.

If indeed the Administration throws the rest of the imports from China into the tariff mix, as JP Morgan’s team is convinced it will, we can expect that the market — anticipating huge long-term economic consequences — will reject that move in no small way. Which would be a good thing, as — given that the economy forever makes or breaks political careers/legacies — it will inspire a swift coming to the table to hammer out one last “win”…

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