- The markets have been roiled following President Donald Trump’s proposed tariffs on China and the country’s response.
- That’s in contrast with last year, when promises of tax cuts and deregulation helped support the market.
- According to Larry Hatheway, the chief economist and head of investment solutions at GAM, there has been a change in the views on whether Washington will be supportive of markets.
The Trump bump for the stock market is turning into something else.
For a variety of reasons, 2017 was the second-best year for stocks since the recession. High on the list were President Donald Trump’s promises to cut corporate taxes, motivate companies to return billions of dollars in untaxed profits to the US, and scale back regulations.
But in 2018, the other half of his agenda is becoming more evident, particularly as it concerns his promise to fight for trade deals he sees as more favorable to the US.
“In 2017, Washington politics were definitely business friendly: tax cuts, deregulation,” Larry Hatheway, the head of investment solutions and chief economist at GAM, told Business Insider on Tuesday. “In 2018, Washington politics are definitely business unfriendly: protectionism and selective White House criticism of certain fairly important parts of both the equity market and of the growing ecommerce world.”
US stocks plunged on Friday after President Donald Trump threatened more tariffs on China, escalating an ongoing trade dispute. Earlier this week, China announced plans to impose tariffs on more than 100 American exports worth $50 billion annually, including important items like soybeans and autos. The tariffs, which don’t go into effect immediately, were retaliation for similar measures the US slapped on Chinese steel, aluminum, dishwashers, and solar panels.
Trump’s motivation includes appealing to his voter base, Hatheway said. And this could get amplified ahead of the November 6 midterm elections, when seats in the Republican-majority House of Representatives and Senate will be contested.
“I think there’s a perception that with partisan politics again becoming dominant as we go into midterm elections, the White House’s strategy is to go deep with its voter base rather than go broad,” Hatheway said.
“Going deep means going back to issues that were successful in the campaign — anti-immigration, protectionism — and those are just not going to be as supportive for equity markets and for business confidence as the prospect of tax cuts and deregulation.”
As Trump puts more pressure on China, he’s certainly keeping tabs on the stock market, which he has repeatedly praised and took credit for as it surged during his presidency. During a press briefing on Friday, White House Press Secretary Sarah Huckabee Sanders repeated that the administration is focused on long-term economic fundamentals.
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