Donald Trump tanked the stock market Thursday. Our president announced he would slam down about $60 billion worth of tariffs on China in retaliation for trade practices the White House says amount to stealing U.S. intellectual property. By the end of the day, the Dow Jones Industrial Average was down more than 700 points. The S&P 500 was down about 2.5 percent, the most since its last freakout in February.
Is this an overreaction? Maybe. Maybe not. Investors don’t seem to be anxious so much about these tariffs alone as they are about the possibility of an escalating trade war, which could be a downer when quarterly earnings roll around. Outlets like CNBC and Investor’s Business Daily latched on to Trump’s comment that this would be “the first of many” trade actions against China, which is already vowing retaliation. Remember how Republicans used to rant and rave about how President Obama was kneecapping the economy by creating a nebulous sense of “economic uncertainty”? Well, this is what real uncertainty looks like. An on-tilt protectionist is sitting in the Oval Office. And thanks to the vast powers over trade that have been invested in the presidency through the decades, he can unilaterally hurl tariffs at our partners in international commerce. Who knows what’s coming?
To its credit, the administration is at least deploying these tariffs in response to a real problem. Beijing is notorious for essentially forcing foreign businesses to share their intellectual property and trade secrets with Chinese corporations as the price of doing business in the People’s Republic. The country’s economic development strategy has hinged on it for years. And the U.S. isn’t the only nation worried that its companies are being pushed into giving away their competitive edge; European and Japanese officials are also concerned, and have previously vowed to work with the U.S. to tackle the issue. That said, it’s not clear these duties will get us much closer to a long-term solution. Maybe they’ll encourage China to negotiate changes in how it treats IP. Or maybe it’ll just turn into a resentment-fueled global slap fight.
In the meantime, Thursday’s market reaction is a reminder of the inherent tension in Donald Trump’s economic agenda. The man loves to brag about the stock market when it is rising, and he’s done his part to goose investors’ returns by slashing taxes and rolling back regulations. But Trump is also a sincere protectionist—he has literally shouted at his staff to “bring me tariffs.” It’s one of the few policy topics he really, truly seems to feel strongly about, even if the nuances are way beyond his ken. And while certain domestic industries might benefit from tariffs, they’re unlikely to help corporate America as a whole, especially if our own exporters start feeling the bite from retaliatory measures in China or Europe or wherever else. At some point, Trump may have to choose: Does he care more about being a trade warrior, or tweeting about the Dow?