Tariff danger

It was announced that the US would be putting tariffs on imports of washing machines and solar panels.  Stocks were up afterwards and futures are up smartly this morning.

So it's all good, right?

We would say, "No, not really."

Tariffs make people in the country levying them feel good (Samsung has converted an old Caterpillar facility and has hired 500 people a short drive away from us, btw) right up until the other side strikes back.  Battling back and forth on tariffs can quickly turn into a trade war.  So, we advise caution.  These particular imported items being taxed are South Korean and Chinese products principally.  Those are serious trade partners.  Be careful.

Now, the threat of tariffs can get plants built in the US and more American agricultural products sold abroad.  And perhaps we have to act to make the threat real.  We certainly understand the negotiation leverage this provides. But, again, caution and care please.  There is danger there.

The stock market crashed in 1929 when it was clear the votes would be there to implement the Smoot-Hawley Tariffs in 1930.  Market traders don't wait for the actual event when its clear that it will happen.  So, are we predicting this move yesterday will cause a major sell-off?  No, not yet.  But we're watching closely.