It appears that Trump is now taking credit for the tremendous rally in the stock market yesterday after he put a 90-day pause on his insane tariffs (except for China) that originally caused the markets to tank and wipe out over $6 trillion in value. That’s a bit like pouring gasoline around your house, setting it on fire and then, just before it collapses you drive up with a fleet of fire trucks, put out the fire and take credit for saving the house. The problem is, the house, like the current economy under Trump, is not structurally sound and long-term damage has been done.
One of the real reasons Trump paused his tariffs is because the bond market was about to melt down. However, I also cynically believe that Trump just enjoys showing the world how much power he has wielding either his pen or his messages blasting forth from his Truth Social account. I also cynically believe that some Trump insiders, and quite possibly the Trump family themselves, profited handsomely from both the market crash and the market rally. In previous administrations these kinds of manipulations would lead to insider trading investigations but given the supplicant DOJ and the gutting of Federal watchdogs, that is very unlikely to occur.
As I posted in a comment to Robert Reich’s Substack column yesterday, perhaps the existing United States motto, “e pluribus unum” (out of many, one) should be replaced with, “mendacium, fallere et furantur” (lie, cheat and steal)! Given the corruption, grift, and widespread pardoning of convicted criminals, the latter motto would seem to be more appropriate these days.
No doubt we have not seen the last of the stock market roller coaster ride. China has not capitulated to Trump, and I don’t think they will. China has the second largest economy in the world and, particularly after J.D. Vance called the Chinese people peasants, they want to show the world they can stand up to the United States and not show any weakness. As I said in an earlier post, the China Trump is dealing with now is not the same China he dealt with in his first term. And the fact is, China could inflict a lot of damage on the U.S economy and they can also absorb a lot of pain.
As of January, foreign countries owned $1.32 trillion of U.S. mortgage-backed securities (MBS) and the four countries holding the largest share are: Japan, China, Taiwan, and Canada. If China started selling off their securities, they could have a huge negative impact on mortgage rates and the housing market which is already struggling. The negative impact would be even greater if China persuaded other countries that have been attacked with tariffs and insulted by the Trump administration to join in the sell off.
Further, U.S companies will not be making huge investments in building manufacturing plants in the United States given the current volatility and capricious tariff strategy coming out of the Trump administration. Businesses like stability so they can forecast things like Return on Investment. That is impossible in the current Alice in Wonderland economic rabbit hole that Trump has dragged the country into.
Yes, the market was up 2,900 points yesterday but as I write this, the Dow futures are down 400 points. And there is still the big unknown about what China will do because I am quite sure they will not just roll over.
So, buckle up! We could all just be having a nice chat as we drift along through the Disney ride, “It’s a Small World” (mind numbing sound track aside!) but instead, we are strapped into a new roller coaster called the Trump economy that is like the biggest roller coaster at Six Flags amusement park on steroids! The worst part is, we don’t know if we’re at the beginning, in the middle or near the end. Hang on!
