Yesterday, Trump hiked tariffs on China to 125% because the Chinese retaliated again earlier in the day. Many expect this to go over and over, but we got a couple of hints that we might be reaching the peak in the escalation.
During a press conference, Trump spent friendly words for Xi defining him the smartest man in the world, and he repeated that “China really wants to make a deal, but they just don’t know how to go about it”.
Trump also added that he couldn’t imagine further increase of tariffs on China. So, he really wants to stop with the escalation but he’s too proud to make the first step.
We’ve got also a hint from the market yesterday. Once the Chinese retaliation news broke out, the market went down a bit but eventually recovered all the losses. This could be a sign that we are at the peak of this and the market is seeing an end.
Now, will the Chinese retaliate? I don’t know. I suspect we get one last retaliation but I would look to fade the (potentially) negative reaction. The strength of the retaliation will also be weighed by the market.
Maybe I’m too optimistic but the world always finds a way to grow and innovate eventually. Druckenmiller once said that “bulls make more than bears, so if anything, being an optimist about life and about things in general is a great attribute as an investor. You just can’t be starry eyed and naive.”
It pays to be an optimist in the long run
