Donald Trump’s negotiating style is unlike any president we’ve seen in our lifetimes and, perhaps, unlike any that has ever sat in the Oval Office. In his book, The Art of the Deal, Trump lays out how to win at the negotiating table. The attributes are constant brinkmanship, changing boundaries, last-minute changes, and the willingness to walk away. Much of this is done in a very public manner in order to put maximum public pressure on his adversaries.
Of course, with anything new, it is taking a while to get used to these tactics. Since Reagan, our presidents have used quiet, behind-the-scenes diplomacy with a more global objective. Trump’s bombastic, America-first rhetoric and strategy has created its share of shock value, at the least, and it continues to confound the media, the markets, and his political opponents.
It seems as though the markets have stalled due to uncertainty over whether Trump will win trade negotiations with many countries, including our allies. The Dow Jones trends to 26,000 when it appears Trump has the upper hand and 24,000 when he doesn’t. 25,000 has been a crisscrossed countless times in the last three months.
So, how will this all play out? We think that Trump will improve US trade deals and the market will break to the upside, as a result. After all, the huge trade deficits that the US has with our foreign partners means that they need trade with us more than we need them. Giving Trump such leverage in a negotiation only increases the likelihood of his success.
It appears clear that Trump laid out his trade policies to US companies before he began visiting other countries. He likely told domestic businesses, ‘Make it in the USA, if you want to sell it in the USA; otherwise, you’ll face the same tariffs as foreign countries.’ Jobs are coming home to America well ahead of NAFTA or China trade deals being redone. That may very well mean US manufacturing is coming back. Growth and interest rates will be up. Unemployment will continue to trend downward, and the value of American Enterprise (stocks) will find itself on the rise.
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