The media has Trump’s “trade war” all wrong.

One of the most perplexing aspects of this new administration and the media’s response to it is how surprised they are when Trump does what he said he was going to do.

This past weekend saw a tremendous amount of news around the threat of tariffs on our largest trading partners — Canada, Mexico, and China.

I purposely worded that as “the threat of” because over and over, Trump has acted in a very predictable fashion.

He comes out firing with statements about massive changes he is going to make politically or economically.

Predictably, his political opponents, the media (aren’t they the same?) and members of his own party’s establishment quickly respond by predicting an oncoming apocalypse if he does what he just said he would do.

Every time, however, he then uses the “threat” of his big changes to exact some sort of value in exchange for toning them down.

I will not judge the real value of what he gains in this situation, because I’m not sure he even cares very much — he just gets SOMETHING.

Then everyone who protested is left scratching their heads when it turns out we don’t have a disaster after all… and may even be better off than before.

This was happening in his first administration. And now that he knows a lot more about politics and doesn’t need to worry about reelection, it’s happening in this administration times ten.

His actions this past week have me thinking about his method and its impact on the markets.

I keep asking myself one question…

The Question the Media Won’t Touch

What if Trump wins? Let me explain what I mean by “win.”

What if he repeatedly goes out with big, blustery threats of action and repeatedly puts our country in a better spot — both politically and economically?

The consensus strongly argues that this won’t work and that he will irreparably damage the existing world system. I don’t think that is a bad thing.

This brings us back to my earlier point about trade and tariffs.

There is an overwhelming consensus amongst the “smart” money that free trade is mutually beneficial. Disrupting it would cause an economic catastrophe.

I have a LOT of problems with this idea.

First, what is “free trade”?

If everything were allowed to move across borders with no tariffs, subsidies, or restrictions whatsoever, then that would be true free trade.

The reality, though, is much different than this academic model. In the real world, countries put up substantial barriers.

Second, some would claim that even if trade is less than “free,” the United States still benefits and our consumers get lower prices.

The system has worked pretty well for us so far, right? Just look at how well the U.S. has done economically compared to its peers.

This argument makes more sense, but I would ask, “How do we know?”

That is, how do we know that tactical tariff threats to extract an even better deal for us won’t work better?

That is not a strategy we have pursued actively in almost a century. We certainly have never pursued it in the modern world.

There is another popular Wall Street saying that says, “If you owe the bank $100, you have a problem. If you owe the bank $100 million, they have a problem.”

The idea is that an outsized liability is as much a problem for the borrower as the lender.

This sums up our trade imbalances with these three large partners.

They buy a lot more from us than we do them, and it makes up a much bigger part of their economy. This is a strength for them but also a weakness.

Here is a post from X with the data.

Source: X

In the wake of the tariff threat with Canada and Mexico, many pointed out that exports to the United States made up 20% and 35% respectively of their economic output. The corresponding number for the United States was around 1.5%.

They are much more vulnerable than we are economically and there are real imbalances. Imbalance politically and economically that we are valid to ask to be addressed.

That brings us back to my question — what happens if Trump wins?

He goes out and threatens tariffs and other actions against our largest trading and economic partners and extracts benefits for our economy.

I think the stock market goes higher — potentially a LOT higher.

Not only will we reap the benefits of the value extracted, but we also remove the “risk” of the apocalypse that is being fed to us all by the media and the “smart” money.

I don’t know that this will be the outcome. But we are about to find out in the coming months.