There are visible economic indicators today that positive U.S. MAGAnomic results are overwhelming the voices of purchased political leaders trying to sell a narrative of doom around President Trump’s tariff proposals and reciprocal trade reset. A key point is the U.S. stock market growth amid tariff, trade and NAFTA withdrawal discussion. As CTH has discussed the eventual trade outcomes appear baked into the latest market analysis.
Bolstered by election results showing increased momentum for team MAGA, and decreased likelihood for a Democrat wave, the overall economic news -and factual corporate bottom line results- are flooding the zone with optimism. Amid the strong foundation for U.S. investment and economic growth, the reciprocal trade strategy is no longer heavily feared. Simply put, the ‘America First’ policies are working.
Not only are Trump’s economic policies working (jobs, wages, investment growth), but they are gaining massive momentum as analysts begin to quantify the possibilities of expanded economic growth well beyond the -formerly outrageous- 3% GDP target. The ceiling is being raised faster than the winnamins can be digested.
Amid this U.S. MAGAnomic environment, threats of counter-tariffs by Mexico, Canada and the EU are as useless as feathers in a hurricane:
(Reuters) […] EU members have given broad support to a European Commission plan to set 25 percent duties on up to 2.8 billion euros ($3.3 billion) of U.S. exports in response to what is sees as illegal U.S. action. EU exports that are now subject to U.S. tariffs are worth 6.4 billion euros. (link)
Consider the EU $3 billion tariff threat against this:
On a $20 trillion economy 3% growth = $600 billion in economic expansion.
Note: EU Tariff Feathers and U.S. Economic Hurricanes.
The best play for return-on-investment is INTO the U.S. Exactly as planned.
This MAGAnomic win shows up in narrowing trade deficits:
(Via PPD) The Census Bureau and Bureau of Economic Analysis said the U.S. trade deficit narrowed sharply to $46.2 billion in April. That’s down $1.0 billion from a revised $47.2 billion in March and far under the $53.1 billion monthly average of the first quarter 2018 (1Q).
The 3-month average goods and services deficit decreased $2.2 billion to $49.6 billion for the three months ending in April. Average exports increased $2.9 billion to $209.3 billion and average imports increased $0.7 billion to $259.0 billion.
The report indicates a big net-positive for second-quarter (2Q) gross domestic product (GDP), which the Atlanta Federal Reserve currently forecasts at a whopping 4.5%. (more)
This is the domestic background for President Trump, Commerce Secretary Ross, Treasury Secretary Mnuchin, and U.S. Trade Representative Robert Lighthizer to confront the aggregate trade issues with China, the EU and NAFTA.
As an outcome of the growth dynamic, the U.S. leverage carried into the trade-reset discussions is much larger than any threats made by opposition. President Trump is likely to have fun at the G7, though I can also see him taking a few share-the-wealth “lumps out.”
Well,…. then again,…