Friday, August 23, 2019

Trump Trades Blows (Up)

Donald Trump just put a massive hole in the side of US-China relations, along with the US economy, by declaring Chinese President Xi Jinping the "enemy" and ordering US companies to "start looking for an alternative" to buying from and manufacturing in China.

Stocks plunged on Friday after President Donald Trump ordered in a series of tweets that U.S. manufacturers find alternatives to their operations in China. Apple led the way lower.

The Dow Jones Industrial Average traded 600 points lower, or 2.3%. The S&P 500 and Nasdaq Composite slid 2.5% and 2.9%, respectively. The losses brought the Dow’s decline for August to more than 4%.

Trump tweeted on Friday: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..your companies HOME and making your products in the USA.” However, it is not clear how much authority the president has on this front.

“The threats always been out there but there’s been no need to provoke that,” said Art Hogan, chief market strategist at National Securities. “It’s almost like the administration was expecting the Fed to announce a rate cut at the Jackson hole meeting.”

Apple shares dropped 4.4%. The VanEck Vectors Semiconductor ETF (SMH) slid 4% as Nvidia and Broadcom both fell around 5%. Caterpillar shares, meanwhile, pulled back 3.1%.

Friday’s decline added to a series of sharp moves down this month. The Nasdaq has now fallen at least 1% six times this month while the Dow has posted five drops of 1% or more. The S&P 500 has closed down 1% or more four times in August. Those moves come as the U.S.-China trade war intensifies while the bond market flashes a recession signal.

Trump’s tweets come after China unveiled new tariffs on Chinese goods. China will implement new tariffs on another $75 billion worth of U.S. goods, including autos. The tariffs will range between 5% and 10% and will be implemented in two batches on Sept. 1 and Dec. 15.

The White House has previously said that Trump's tweets carry the weight of executive order.  We'll see how true that is in the days to come.

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