The escalation of the trade war between the U.S. and China is starting to bite as the S&P 500 index fell by 6.5 percent in the month of May. As a reminder, over a year ago, on March 2, 2018, President Trump wrote on Twitter “trade wars are fun, and easy to win.”
On April 29, 2019, The Wall Street Journal ran a headline “Mnuchin Suggests China Trade Talks Could Wrap Up by End of Next Week.” At the conclusion of the last public meeting between the U.S. and China on May 10, 2019, Treasury Secretary Steve Mnuchin said the talks were “constructive.” A few hours later President Trump threatened China with tariffs on an additional $325 billion worth of goods from China.
In late May President Trump announced plans to impose tariffs on goods coming into the U.S. from Mexico. The uncertainty around global trade is destabilizing at best. It is clear that the Treasury Secretary’s May 10th trade talks were anything but “constructive.” The fact of the matter is we live in a global economy with supply chains all over the world. The notion that trade policy can change with one tweet is unsettling to say the least.