Despite assurances from the animate husk that was once a living man named Wilbur Ross, markets are still discernibly nervous about the prospect of a tit-for-tat global trade war.
Chinese equities are in a tailspin, European shares are sitting at their lowest levels since April and yesterday marked the eighth consecutive decline for the Dow.
Part of the problem on Thursday was Daimler's guidance cut. I guess you can count Benz execs among those who, to quote Wilbur, "don't know what they’re talking about", because "what they were talking about" after the bell on Wednesday was the possibility that vehicles produced in the U.S. well end up caught in the crossfire if Washington and Beijing don't deescalate the situation over the next couple of weeks.
That news led the European autos sector to log its worst day since Brexit and also triggered a widening in CDS on Daimler, Volkswagen and BMW:
Long story short, global markets are starting the wither under the heat and it's likely just a matter of time before U.S. equities catch down to everyone else's reality.
Want to see what "America first" looks like? The Russell 2000 didn't just hit an all-time high this week amid the Dow slide, it also hit an all-time high relative to the MSCI World:
Well, even as Ross and Navarro swear this will all turn out fine, other White House officials aren't so sure. Here's Bloomberg, from an article out on Thursday evening:
Some White House officials are trying to restart talks with China to avoid a trade war before U.S. tariffs on Chinese products take effect July 6, three people familiar with the plans said, setting up a battle with others in the administration who favor a harder line.
There are different views within the Trump administration on what could be considered a win. Hard-liners such as U.S. Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro are pushing for structural changes to China’s policies. Treasury Secretary Steven Mnuchin and NEC Director Larry Kudlow are more receptive to a deal aimed at lowering the bilateral trade deficit.
Right. Of course Steve is apparently not allowed to speak anymore and Larry is recovering from a heart attack, so that leaves Navarro and Lighthizer firmly in control of the narrative - or at least until U.S. stocks slide enough to catch Trump's attention.
On Friday, as we head into the weekend, I thought I would just reiterate how laughable this has become by way of the following quick excerpt from Goldman. Just try to appreciate the sheer insanity inherent in the bank's short recap and do note that while the numbers are notable in and of themselves, the truly hilarious part is how quickly Trump has managed to go from basically nothing in January to threatening $800 billion in total tariffs in the space of just six months:
The White House also announced on June 18 that it would impose 10% tariffs on an additional $400 billion of products from China if intellectual property policies and related issues are not addressed or if China retaliates. This would potentially involve tariffs on two successive rounds of $200 billion each. We note that since President Trump had previously proposed a 25% tariff on a second round of $100bn in imports from China, this latest proposal amounts to a net $300bn increase in products affected. As shown in Exhibit 1, if implemented this would raise the total amount of tariffs the Trump administration has proposed from around $500bn to nearly $800bn, or about 4 times the cumulative amount that had been proposed as of a month ago, before President Trump proposed tariffs on global auto imports on national security grounds. Still, at this point, the amount of US imports subject to implemented tariffs is very low compared to what has been proposed, even if the first round with China takes effect on July 6.
Bless their hearts, at least Goldman is trying to comprehend the incomprehensible.
Other sell-side desks have just given up.
On Friday, for instance, BofAML threw in the towel and called this what it is: "covfefe".
But remember, this could all be a game of three-dimensional chess that only Trump understands.
After all, not everyone is meant to grasp "the true meaning of 'covfefe'":