Battle of The Superpowers, Is This Round Two or Three

In his latest action, President Trump fired his next shot today by ordering a review of additional tariffs. This action prompted an immediate and strong response from China.

As reported in Bloomberg Politics, “At almost the same time as Trump spoke, a senior Chinese government official in Beijing repeated a vow from earlier that day that the country would ‘retaliate immediately, intensively, without any hesitation’ if the U.S. releases a new list of tariffs on $100 billion additional imports. China has prepared for more U.S. trade measures and has drafted detailed retaliatory measures, Chinese Ministry of Commerce spokesman Gao Feng said.”

These actions and statements follow the most recent round of trade threats when, on Thursday, Trump ordered his administration to look at an additional $100 billion of tariffs on Chinese imports.

This caused an upside surge in the precious metals market and a deep and furious selloff in U.S. equities until statements made by Larry Kudlow, the new chief economic advisor to the president, calmed the markets. His statement was simply that the “U.S. could still hammer out a deal with Beijing,” which prompted these price changes.

There is a fascinating dynamic at play in regard to the current trade dispute. The dynamic I am referring to is not between the two superpowers, but rather between President Trump and the members of his administration.

It seems that immediately following actions or words by President Trump which further deepen the divide and increase the probability of an out and out trade war, members of his administration attempt to calm down the fear factor and negative market sentiment.

Today President Trump said that the current trade spat with China may have a negative impact in the short term, but that America would emerge stronger from it. In an interview today on 77 WABC radio Trump said, “I’m not saying there won’t be a little pain.’’

The net result of today’s statements by President Trump was a dramatically lower Dow Jones Industrial Average which lost 572 (-2.34%) points on the day to close at 23,932.

The U.S. dollar once again began to trade under pressure losing 4/10 of a percent today and providing headwinds for gold. Gold futures closed up $8.40 at $1,336.90 per ounce.

Wishing you as always, good trading,