So About That Recession...

<![CDATA[Good news! I bring you good tidings and great cheer. You can retire again. Don't ask me about tomorrow. Tomorrow never comes. About an hour ago, the Trump administration announced a couple developments on the tariff front. First, in response to China going all-in on reciprocity, The United States will now impose a 125% tariff on all Chinese imports effective at Midnight tonight. In addition, to all of the countries now clamoring to renegotiate trade deals with the U.S., all of the rest of the reciprocal tariffs have been paused for 90 days. The only thing that remains in place is a flat 10% minimum tariff. I'll get to that in a bit. Literally within minutes, the latest, greatest example of why one should never sell into a panic took place. The markets skyrocketed. As of this writing, the Dow is back over 40,000, up at least 2,500 on the day. Nasdaq and every other index is well into the green today, recovering much of the angst-causing losses since Liberation Day.Naturally, online, the Anti-Trump, Inc. forces are all lined up in derision, thinking Trump caved, waiting for all of his defenders to have to pivot in three, two, one. I am neither a proponent nor a defender of the President. I simply look at what's going on and analyze. I'm not an expert in global financial markets, so take what follows with whatever grain of salt you wish. I'm going to try to explain what seems blatantly obvious to me for this past week of gamesmanship. It is my analysis, and it not based on any inside information within the Trump administration. First, the tariffs to every country was meant to cause the free world to make a choice - China or us. According to Scott Bessent on the White House lawn early this afternoon, north of 75 countries have chosen us. They are clamoring to renegotiate trade deals. Inevitably, every one of these deals will benefit the United States. It defies logic to believe that America's position vis-a-vis trade with any individual country is going to be worse off after negotiating a new deal. With some countries, we'll be nominally better off. With other countries, we'll be in a much more equitable place. And because we have the commitment of 75+ countries to renegotiate trade, Trump is pausing the tariffs for 90-days in good faith in order to let the negotiators do their thing. The bottom line is none of these pending trade deals would have been offered or committed to without the tariffs used as an attention-getter. Second, by forcing the world to choose between the United States and China, China has become further isolated. Trump has all the leverage in the world to squeeze China, and squeezing them is exactly what he's doing. Here's Scott Bessent addressing the media gaggle on the White House lawn.China is now in a box. Their economy is almost entirely dependent on manufacturing and exports. If their exports crater as a result of the tariffs, their economy collapses. More Bessent:]]>