cornerstonereport.com – March 26th, 2018

It was another tough week on Wall Street as the indices plunged two days in a row with more news on tariffs, even with some of it positive. The Dow plunged over 700 points on Thursday and then 400 on Friday, March 22nd and 23rd.

Trump announces tariff exemptions

Investor’s Business Daily reports that investors seem to fear that the tariffs are just the opening salvos of a pending international trade war despite the fact that the Trump Administration announced exemptions on Thursday.

The tariffs took effect on Friday, but on Thursday the Administration announced that trading partner nations representing more than 50% of U.S. steel imports will be exempt until May 1st, a list that includes the European Union, Canada, Mexico, South Korea, Brazil, Australia and Argentina. There is speculation that Mr. Trump could extend the exemption as May 1st approaches.

More than economics behind Trump’s policies

IBD says that Mr. Trump’s focus is on more than just economic matters such as trade imbalances with China. He is determined to maintain a technological and military edge over China, and tariffs are one tool toward that outcome.

“The unstated rationale of Trump’s actions are pretty clear: The U.S. wants to maintain technological — and military — leadership over China, and that goal has to take precedence over economic cooperation when the two come in conflict. At the announcement of the tariffs, Trump’s plan got an endorsement from Marillyn Hewson, CEO of Lockheed Martin (LMT). Lockheed’s F-35 uses stealth technology that lets it evade detection. Shares of Lockheed rose 3% on Friday.”

Additionally, China has surged economically in the last two decades, but often through unsavory trade practices, one of the most notable being theft of intellectual property. Supporters of tariffs believe that U.S. push back is long overdue. The tariffs are expected to be part of a plan that also includes investment restrictions designed to keep certain U.S. technologies out of China’s hands.

Investors worried despite tariff exemptions

Yet even with the Trump Administration granting temporary exemptions on steel imports from large trading partners, the investment sector fears that this could be just the beginning of an upward ratcheting trade war. The two largest economic power houses talked tough. Trump said Thursday that these steps were the “first of many”. China said it does not fear a trade war.

China’s Silk Road

The article concludes with mention of something Jerry has talked about frequently on both his radio show and at the Smart Money Investor Training Conferences: China’s investment in its “Silk Road” initiative.

“China, meanwhile, is laser-focused on deepening economic integration with economies throughout Asia through its 21st Century Silk Road initiative. The more the U.S. distances itself from trading partners, the easier it will be for China to emerge unscathed from a trade war.”

China recognizes the importance of infrastructure in the free flow of goods between itself and its Asian neighbors and is investing heavily toward making it happen. Jerry has cited the importance of this in future economic development of China and the rest of Asia, and using that information to help clients with their investment needs.

To see this article, click read more.

Source:  Cornerstone Report – Stocks Roiled Again by Tariff Uncertainties