To stabilize the economy and navigate the trade war effectively, former President Donald Trump could potentially take several actions, especially if he were to return to office. His approach would likely be shaped by his previous policies and his focus on “America First” principles, but the economic and geopolitical landscape has changed since his time in office. Here’s how Trump might help stabilize the situation:
### 1. **Negotiating Trade Deals and Tariffs**:
– **Re-negotiating or revisiting trade agreements**: Trump could work to renegotiate trade deals with China, potentially using a more strategic approach than before. This might include selectively rolling back tariffs or offering targeted trade concessions to ease tensions and restore market confidence. He could push for agreements that benefit U.S. industries without alienating American workers.
– **Bilateral focus**: Rather than engaging in multilateral trade agreements, Trump might prefer bilateral deals with key trading partners, allowing for more direct negotiation to secure U.S. interests.
– **Targeted tariff reductions**: Trump might use tariffs as leverage to encourage China or other nations to adhere to specific trade practices, but could also consider phased tariff reductions if it helps prevent further economic damage.
### 2. **Promoting Domestic Manufacturing and Innovation**:
– **Strengthening U.S. manufacturing**: Trump could ramp up policies aimed at reshoring manufacturing jobs, incentivizing companies to bring production back to the U.S. This would address concerns about supply chain dependency and help reduce the economic impact of tariffs and trade wars.
– **Infrastructure investments**: By pushing for significant infrastructure development, Trump could create jobs and stimulate economic growth domestically, which might help counteract some of the negative effects of the trade war.
– **Innovation and technology investments**: Trump’s administration could push for increased investment in critical technologies (e.g., AI, 5G, clean energy) to boost U.S. competitiveness in the global economy.
### 3. **Reducing Regulatory Burdens**:
– **Cutting red tape**: Trump’s focus on deregulation could continue, with the goal of making it easier for businesses to operate and grow, particularly in industries hit by trade tensions. Reducing business costs through regulatory reform could boost economic activity and help mitigate the fallout from tariffs.
– **Tax reforms**: He could push for additional tax cuts for corporations and individuals, which might stimulate spending and investment, especially in sectors affected by the trade war.
### 4. **Addressing Inflation and Cost of Living**:
– **Energy independence**: Trump’s focus on increasing domestic energy production could play a significant role in reducing energy prices, which would help counteract inflation. This could also help reduce reliance on foreign energy imports, further stabilizing the economy.
– **Food and commodity price control**: Addressing key sectors like agriculture and food production could mitigate inflationary pressures, especially if trade restrictions impact the import/export of essential goods.
### 5. **Restoring Confidence in U.S. Leadership**:
– **Diplomatic outreach**: Trump could use his leverage as a former president to restore confidence in U.S. leadership. Engaging in strategic dialogues with China and other global powers might ease tensions and provide a framework for managing trade disputes.
– **Soft power and alliances**: Trump may work to rebuild international partnerships, ensuring that U.S. allies remain on board with trade policies that protect global stability and strengthen U.S. influence on the world stage.
### 6. **Addressing Global Supply Chain Issues**:
– **Decoupling from China**: If the trade war with China continues, Trump may look to reduce the U.S.’s reliance on Chinese goods through reshoring or building new trade relationships with other nations (e.g., India, Southeast Asia, Latin America).
– **Diversifying trade partners**: By diversifying trade relationships, Trump could help reduce the negative effects of tariffs by establishing stronger economic ties with other regions.
### 7. **Maintaining Strong National Defense**:
– **Security and stability**: While not directly related to trade, Trump could continue his emphasis on a strong military presence, which may offer geopolitical stability, especially in areas where trade routes or critical resources are at risk.
Ultimately, Trump’s ability to stabilize the economy and manage the trade war would depend on his capacity to balance national interests with global realities. While some of his policies, like tax cuts, deregulation, and trade tariffs, might have immediate positive impacts on domestic markets, long-term success would require deft handling of international relationships and ensuring that U.S. industries are not unduly harmed by global economic shifts. Would you agree with this approach, or do you see other potential strategies that could help stabilize the economy during a trade war?
FULL TRANSCRIPT
This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Alex Ossola: US stocks plunge, losing more than $3 trillion in market value. Plus, why amid a market sell-off, investors are turning to consumer-staple stocks. And what a weaker dollar means for the US’s economic future.
Jon Sindreu: What investors are realizing today is that the growth prospects of the US are deteriorating.
Alex Ossola: It’s Thursday, April 3rd. I’m Alex Ossola for The Wall Street Journal. This is the PM Edition of What’s News, the top headlines and business stories that move the world today. US stocks have suffered their biggest single-day wipe out in market value since the COVID route in March 2020. Dozens of household name stocks posted double-digit declines, including HPE, Nike and Target. The US dollar sank, oil and gold both fell and investors dashed for the safety of treasuries. The decline sets up financial markets for one of their most precarious periods in recent years as the tariffs and the international reaction test the faith investors used to stick with stocks. The Dow fell more than 1600 points or about 4%. The S&P 500 slid about 5%. And the Nasdaq was down more than 1,000 points ending the day, roughly 6% lower. All in all, US stocks have lost roughly $3.1 trillion in market value. For more, I’m joined by WSJ markets reporter Hannah Erin Lang. Well, Hannah, what a day it’s been for the markets. What happened here today?
Hannah Erin Lang: It’s fair to say that today was kind of a bloodbath for markets. We certainly got hints that that was coming. Stock futures started to turn lower last night after President Trump’s speech, but this was really quite a dramatic day. We saw the S&P 500 fall a lot. We saw the Nasdaq notch its largest one day point decline on record. Treasury yields fell, the dollar fell, so there was turmoil in almost every corner of the market. And of course, what’s driving this is professional investors and businesses just scrambling to adjust their plans and their strategies in response to what one analyst called, “A worst of the worst case scenario when it comes to the President’s tariff plans.”
Alex Ossola: I mean, there’s so much that happened and so many things were affected, but I’m curious what stood out to you.
Hannah Erin Lang: This is something we’ve been monitoring for a while, but it was definitely, cast in very stock terms today. The Magnificent Seven, these large cap tech stocks that were on top of the world for a while, they suffered some really big losses today. The Roundhill Magnificent Seven ETF that tracks all of those as a group, it was down about 7%. Amazon and Apple were some of the biggest losers around 8 or 9% losses today. But also, I was just really surprised by the depth and breadth of these losses. As I mentioned, there wasn’t really a part of the market that wasn’t touched by this at some point today.
Alex Ossola: Okay, lots of pain for investors today. Is it over now? What happens next?
Hannah Erin Lang: Today might have been more intense than the days to come. This was the initial reaction. Investors grappling with this plan that was much more severe than they had anticipated. But what I’m hearing from the sources that I talked to, whether they’re professional portfolio managers or just individual investors, is that this volatility, these up and down days seem to be something that’s going to stick around just because of the potential impact of this plan. So this is definitely not the end of the effects that we’re going to see from this plan, and unfortunately not the end of what I expect will be continued volatility for investors as well.
Alex Ossola: That was WSJ reporter Hannah Erin Lang. Hannah, thank you for being here.
Hannah Erin Lang: Thank you so much for having me.
Alex Ossola: Amid today’s broader sell-off, some stocks fared better than others. I’m joined now by WSJ reporter Stephen Wilmot. Stephen, what kinds of companies saw their stock price rise today?
Stephen Wilmot: In the European trading morning, we got, for example, the drinks makers, Diageo and Campari. Their stocks rose because there had been fears that their Mexican tequila imports to the US which account for quite a dominant chunk of the US businesses these days would be hit by tariffs. Because the current exemption for USMCA compliant goods, that’s goods that comply with the free trade area rules in North America, that that exemption would end. And so the fact that it wasn’t, led to a bit of a relief for some sectors. Another one was pharma, because pharmaceutical products were exempted. As the trading day has evolved, that’s changed a bit because the liquor companies have started to trade down. And that’s because a consensus is starting to build that actually these tariffs could be recessionary. And obviously that’s not good for liquor companies, but pharmaceuticals are a traditional safe haven trade because people continue to buy drugs even in recessions.
Alex Ossola: I’m also seeing the share price go up for companies like Phillip Morris, Nestle, InBev, what do they have in common?
Stephen Wilmot: These are often considered consumer staples. They sell goods that people tend to buy, whether in good times or in bad. Nestle sells pet food, formula, coffee. So things that people won’t stop buying in a recession. Phillip Morris, obviously cigarettes, a classic recession trade. And Anheuser-Busch beer, Budweiser, which is considered a bit more of a staple alcoholic drink than tequila, for example, which goes into high-end cocktails that you might consume in bars. So investors rotate into these consumer staple stocks in anticipation of a recession, in anticipation of consumers trading down into cheaper, more basic product categories.
Alex Ossola: Some of the companies that started the day down quite a bit, including Nike, now they’re starting to perhaps not look quite so much like anomalies, right?
Stephen Wilmot: Yes. A sea of red at the moment. It started the day with a slightly more nuanced reaction, I would say. Adidas in European trading was one of the big losers early on in the European trading day, following Nike in post-market trading in the US. And that’s obviously because they import a lot of shoes from Vietnam and Vietnam got hammered with particularly high reciprocal tariff. And Southeast Asia was in general the kind of big loser from the announcements. But then as the day is built, the stock market pain has spread essentially, and the recession trade is built so that everything that is generally macroeconomically sensitive has started to sell off. So bank financials, property stocks, things that have nothing to do with tariffs.
Alex Ossola: That was WSJ reporter Stephen Wilmot. Thank you, Stephen.
Stephen Wilmot: Thank you.
Alex Ossola: Canadian Prime Minister Mark Carney said today, “That his country would match President Trump’s auto tariffs with 25% tariffs of its own.” The levy would be on US vehicles that are not compliant with the US-Mexico-Canada Trade Pact. He said, “The counter-tariff would apply only to finished vehicles and wouldn’t affect vehicle content from Mexico.” Carney said, “The tariff could raise up to the equivalent of about 5.6 billion US dollars, which would be used to help workers and companies affected by the Trump tariffs.” The Canadian Prime Minister also told reporters at a press conference, “That President Trump’s tariff order will rupture the global economy and increase the risk that the US will fall into a recession.” That he said, “Would make it very difficult for Canada to avoid something similar.” Coming up. Trump’s tariffs were supposed to boost the dollar. Why is it falling instead? That’s after the break. Today’s market sell-off was no surprise to analysts, but one thing they hadn’t expected, a falling US dollar. The dollar slipped to its lowest level of the year, sinking more than 2% against the Euro, Japanese Yen and Swiss Franc. I’m joined now by WSJ Heard on the Street columnist Jon Sindreu to discuss. Okay Jon, what’s going on here? Trump’s tariffs were supposed to boost the dollar. Why is it falling?
Jon Sindreu: One reason could be that the dollar was very expensive already, but that still doesn’t explain why the drop was so obvious. And also the dollar has been dropping most of the past month and a half, ever since Trump basically announced those big tariffs on Canada and Mexico. What investors are realizing today is that the growth prospects of the US are deteriorating. And it turns out that even though they might be right, that a tariff does mechanically push up the dollar, actually the growth part of it is far more important.
Alex Ossola: So why did this catch analysts by surprise?
Jon Sindreu: The vision that the dollar should go up has been around for quite a while. It kind of worked in the first Trump term when he put his first tariffs on China. But this time we knew the tariffs would be larger. Analysts were saying during the campaign, “Yeah, yeah, the tariffs will be dollar positive.” And of course, this joins other policies that are attached to Trump, which are also supposed to be dollar positive, like cutting taxes and maybe interest rates will go up because of Trump. And that also means there’s more money to be made in the US and people move more money there. But what they forgot is, yeah, that’s fine and sometimes it works. But the long-term outlook on whether equity investors will make money here the next 15 years as they have this past 15 years rather than investing in other parts of the world, that’s actually huge. So that’s what the stock market is pricing in today.
Alex Ossola: So just looking at where the dollar is right now, what does it tell us about the long-term prospects for the US economy?
Jon Sindreu: It’s saying that this as a growth strategy is not a good one. This is not a growth strategy that reminds us of the cases where protectionism has had some success. And when we look at the US economy, we don’t see a coherent way to perhaps achieve the goals that the administration says that they want, such as bringing back manufacturing jobs and increasing productivity growth in what they’ve announced. So investors don’t believe that this will lead to higher productivity growth and they have good reason to not believe it.
Alex Ossola: That was WSJ Heard on the Street columnist Jon Sindreu. Thank you, Jon.
Jon Sindreu: Thank you.
Alex Ossola: In other news, several National Security Council staffers were fired this week after right-wing conspiracy theorist, Laura Loomer alleged to President Trump that some members of his administration weren’t aligned with his priorities. That’s according to people familiar with the matter. The people said that four NSC aides were fired overnight and that two other NSC aides were let go on Sunday. The exact reasons for the staffers ouster couldn’t immediately be determined. NSC spokesman Brian Hughes declined to comment. In a statement, Loomer declined to discuss her meeting with the President. And finally, President Trump’s tariffs are truly global. Towards the bottom of the list of tariffs the White House released yesterday is an entry titled Heard and McDonald Islands, against which the US plans to levy a 10% tariff, except the Heard and McDonald Islands don’t have any people living there. Instead, the remote Australian territory located about a thousand miles north of Antarctica is home to a large colony of penguins. As Australian Prime Minister Anthony Albanese said, “Nowhere on Earth is exempt from this.” And that’s What’s News for this Thursday afternoon. Today’s show is produced by Anthony Bansie and Pierre Bienaimé with supervising producer Michael Kosmides. I’m Alex Ossola for The Wall Street Journal.
