"Go ahead, skin it"
Another post about tariffs
This will be a short article because every YouTuber and Sub-stacker on the internet has already made their “Trumps tariffs” post and I’m not sure I have a ton to add to the conversation.
My intention with this post is to discuss the current environment and what I’m thinking and buying, not to be another Trump apologist or hater. After all, I’m here to invest for retirement; I’m not a political commentator, nor a macroeconomist.
All I need to do is decide whether or not I should react to the opportunities—or lack of opportunities—before me.
Trumps whipsaw
Unlike his first term, Trump has signaled that he is not concerned about the stock market. With the trade deficit in his crosshairs, Trump came out guns blazing last week on “liberation day”, essentially picking a fight with the entire world on trade. His ultimatum to trade partners; balance trade or face tariffs.
Let’s just say the markets were not pleased.
But as of April 9th, Trump already paused some tariffs for the next 90 days, excluding China, indicating that he may have realized that he was a bit over his skis. This of course, sent markets screaming higher after a brutal week.
Nevertheless, markets are once again down by 3% this morning, April 10th, as the reality sets in: tariffs are still on the table.
I generally agree with balancing trade and dealing with the deficit, but Trumps approach is a bit aggressive. It’s not wise to flex on all of our trading partners so quickly and dramatically because it will likely provoke them to retaliation. Reminds me of one of my favorite scenes from Tombstone when Wyatt Earp is provoking Jonny Tyler to draw his pistol.
“Go ahead skin it, skin that smoke wagon and see what happens!”
“You gonna do something or just stand there and bleed?”
Lol What a great movie, a classic western.
Anyways, that’s the question I keep asking myself concerning China and other trade partners, are they going to do something? or just stand there and bleed? In other words, are they going to deal with higher tariffs or help balance trade? or are they going to draw the pistol and fire off retaliatory tariffs?
I appears China has drawn the pistol and retaliated with an 84% tariff, to which we responded with a 125% tariff. So, China has chosen that path of a trade war, at least for now.
Tariffs still on the table
For the rest of American trade partners, it’s best to think of “liberation day” as the initial flex, or as Guy Spier put it in his recent article, “it’s the opening bid.” It’s a foundation to work from and negotiate from. One can only hope tariffs are negotiated downward.
The bad news is, despite a 90 day pause, tariffs are still on the table, and if they go into effect in 90 days, they will inevitably be reflected in earnings later this year.
The good news is, 50 + nations came forward a few days ago potentially ready to negotiate trade agreements. 1 One can only hope that these go well and a trade war escalation is avoided.
Only time will tell how this plays out.
Stocks I’m buying
Although I did add to many positions, I did didn’t do anything in size, nor did I open any new positions. I have a sizable cash position ready to deploy if opportunities arise. I increased my position in the following companies.
Google
Amazon
Vistra
Api Group
Dream Finders Homes
Asseco Poland
Acuren
Conclusion
There are no real winners in a trade war, and there is no industry that would be unaffected by one. However, there are a few industries that could potentially provide some protection, such as insurance, defense, utilities, and communications. But even these would inevitably be affected in one way or another as second- and third-order effects take hold.
At the end of the day, no one knows the future. The trade war could escalate dramatically, or favorable negotiations could be reached within a few weeks or months. I’m not taking a strictly bullish or bearish outlook. Instead, I’m doing the same thing I always do: looking for good opportunities in undervalued companies with good management.
Thanks for reading!
https://www.bbc.com/news/live/ce3qnyr7y94t