Key Points

  • Anyone still calling the trade situation between the United States and China a “skirmish” (or a “kerfuffle”) must have been on vacation with no Twitter access last week.

  • Leading indicators are still flashing limited recession risk, but the recent downward revisions to profits and payrolls were notable.

  • The stability in the dividing line between the manufacturing and consumer segments of the economy is coming under increasing stress.

The Wiktionary literal/original definition of the phrase “shoot from the hip” is to “discharge a firearm while it is held near the hip, without taking time to aim via the gunsights.” The figurative/modern definition is to “speak quickly based on first impressions, without carefully studying the background information or wider context.” Last week we witnessed what could be defined as tweeting-from-the-hip.

As I queried on Twitter last Friday, I’m wondering whether there remains anyone still calling the trade situation between the United States and China a “skirmish” and not a “war.” The latest salvo(s)—on top of what was already in place or in the queue—was China’s retaliatory tariffs on U.S. imports and the re-imposition of tariffs on U.S. autos/auto parts. This was followed by President Trump’s announcement Friday that the United States will raise the existing 25% tariffs on $250 billion of imports from China to 30%; and raise the 10% tariffs on the remaining $300 billion of goods we import from China to 15%.

I hereby order…

Then of course there was the tweet by Trump “hereby ordering” U.S. companies to move operations from China, with the threatened utilization of the International Emergency Economic Powers Act (IEEPA); which if declared, would give the president broad authority to block the activities of individual companies or entire economic sectors.

It was a recipe for a swift decline last Friday; with the retaliatory upping of tariffs by President Trump coming after the market’s close. Early this morning, S&P futures were plunging anew, only to be lifted by a comment from Trump at the G-7 meeting that China “called our trade people and said let’s get back to the table.” And after declaring both China’s President Xi Jinping and Federal Reserve Chair Jerome Powell “enemies” in a tweet Friday, today Trump lauded Xi as a “great leader” and said “anything’s possible” when asked if he planned to delay tariff increases on China.

And so it goes.