Every day, the mainstream media blasts Trump for his tough trade talk. They blame him for every dip in the stock markets (even though they would never give him credit for its growth), and they are determined to convince you that he has no idea what he’s doing.
While it’s easy to bash the media, I’m inclined to give them a pass on this one. Trump’s trade policies are very hard to follow, and he has most of the world fooled at this point. But, if you look a little deeper, you’ll see that there really is a master plan, and the left is going to be eating their collective hats when they finally realize what is happening.
Understanding the intricacies of Trump’s trade plan starts by reexamining the stock market. As you may have heard, the markets are still in the midst of a correction that began in February.
If you watch major news cycles, they claim that each dip and rally is the result of trending news. This isn’t accurate. Such events can impact stock markets, but this particular correction (and corrections in general) is a larger scale cycle that has too much momentum to be heavily influenced by daily news. A major, earth-shaking story could change things, but the little bits of tariff talks here and there are not as impactful as you might believe.
Here’s how you know that the current state of the market isn’t about daily events. It began with good news. A record-setting jobs report heralded a massive sell-off at the start of February. Markets aren’t so volatile that they crash over great economic news. In reality, the correction was long predicted and virtually inevitable.
To put it simply, investors responded to Trump’s economy faster than the major cogs could match. The stock markets grew faster than the pace of GDP, production and wages. Eventually, it had to stall so everything else could play catch up.
That is the source of the correction, and it is why true expert economists have successfully predicted the major peaks and valleys so far. Here’s what you need to know. The ultimate valley already happened in March. The correction will most likely continue until September.
Factors could change that outcome, but so far nothing major enough has happened to change these predictions that date back to December. Remember these timings. They’ll be important in a minute.
Taxes
Another big cog in Trump’s plan is the tax cuts that were passed at the end of last year. You’ve likely seen plenty of reports about how they’ve helped hiring and wages. While all of that is true, it’s not the most important part for Trump’s trade policies. The key for those rests in the repatriation holiday.
If you recall, part of the tax reform gave corporations a short-term opportunity to bring foreign cash back to the States at a reduced tax rate. So far, they have brought in over $300 billion. Coincidentally, that sum has also boosted tax revenue by an extra $45 billion, but that’s less important.
Repatriated cash is being used for a lot of things, but mostly it’s being reinvested domestically. This means more hiring, better wages, expanded production and all of the other things companies like to do to boost profits.
This repatriation stream is expected to continue fairly steadily for the whole of 2018. This is a major portion of the capital that is enabling U.S. production to catch up to the markets.
In other words, repatriated cash is the backbone of what will end the correction. It’s a substantial source of money, and it’s why the daily news cycle isn’t really controlling the stock markets. Industry is already kicking into overdrive, and as the experts predicted, it’s closing the gap on the stock markets.
Tariffs
This brings us to that daily news cycle. You’re hearing a lot about tariffs. Basically, Trump is using them as a point of leverage for international trade negotiation. He and a lot of world leaders are hurling a bunch of numbers around, but the actual process of instituting tariffs is a bit slower than Trump’s Twitter account. The final numbers will likely change, but not by as much as what you’re hearing every day.
The most important thing to understand about all of this is the timing. Trump talked about tariffs way back in his campaign days. He didn’t actually make a move to back those words until near the end of February. Is it a coincidence? The left believes its horrible timing; Trump threw oil on a market fire by antagonizing trade partners. In reality, the timing was completely deliberate. Markets were going to dip into volatility anyway. He knew it was likely to happen this year, so he simply waited for the signs of the correction.
Once he was sure, he began the tough tariff talk. It was timed that way so that his negotiations wouldn’t bear a negative impact on the U.S. economy. The rest of the world has risk market losses to fire back at Trump. He doesn’t. It’s an amazing point of leverage.
If things hold steady, you can expect Trump to try and finalize as much of these trade talks as he can by the end of summer. Some conditions could extend the correction to the end of the year and buy him a little more time, but you can assume that he wants new trade deals in place in time for the midterm elections.
The rest of this summer, you will see Trump at his finest to negotiate these deals. He’ll say things that range from total trade war to total concession. In the end, the other parties will be too confused and too at risk to do anything other than what he wants.
I’m not one to put blind faith in any leader, and even I didn’t notice the timing on Trump’s tariff maneuvers for a few months. Once you see the big picture, it’s pretty obvious.
And, based on Trump’s unprecedented success on other fronts, I find my faith in his unpredictable approach growing. It’s very likely that we will see substantial trade agreements in time for a red wave in the midterms.
Predicting the future is always risky, but that’s certainly where things stand right now. Keep a close eye on trade negotiations, and you’ll be able to see the pattern. Trump truly is a mastermind.
