When it comes to the stock market, President Trump is in a box of his own making. He repeatedly took credit for 2017’s stock market gains, with the S&P 500 delivering a nearly 22 percent return. “Stock Market at new all-time high! Working on new trade deals that will be great for U.S. and its workers!” went a typical tweet, this one on July 15 of last year. “Highest Stock Market EVER,” he declared a few days later. I predicted this would not end well for Trump. “Should the American economy or stock market hit a rough patch, Trump will get stuck holding the bag,” I wrote late last fall.
And so it has come to pass. The stock market fell dramatically on Tuesday, with the Dow Jones industrial average diving almost 800 points, more than 3 percent. While predicting what causes gyrations in the stock market is not exactly a science, most observers think this culprit is obvious: Trump’s erratic, belligerent talk about trade and China could trigger both a trade war and a recession in the United States.
Trump has been talking tough on the subject for months, adding tariffs to a host of goods. China, naturally, retaliated. But Trump became more conciliatory this past weekend, apparently coming to an agreement with Chinese President Xi Jinping to pause all future tariff increases for 90 days while the countries attempt to settle the dispute.
Then came Tuesday. Trump took to Twitter to say while a deal “probably will” happen, “I am a Tariff Man.” The sequence of events, when combined with Trump undercutting his chief economic adviser Larry Kudlow on when, exactly, the 90-day negotiation period with China’s government would begin, sent the stock market right back into a tailspin.
One could argue that Trump is, in a rare event, not completely in the wrong. There are products that China charges a higher tariff on than the United States does in return. China’s protection of intellectual property is shoddy, to put it kindly. Artisanal crafters and major corporations alike complain about a veritable tsunami of counterfeit goods from China. For all the talk of the North American Free Trade Agreement costing Americans jobs, one study found that it was trade with China that resulted in the loss of 1 million American manufacturing jobs in the period between the turn of the 21st century and the start of the Great Recession.
But putting Trump in charge of fixing such a problem as this is unlikely to go well. Beyond the usual problems — his profound ignorance, incompetent advisers, volatile temper and susceptibility to flattery — Trump’s understanding of economics seems limited. He appears to think, for instance, that countries pay tariffs. Wrong! The companies importing the items into the United States pay the bill — which they then almost always pass on to consumers.
Trump’s understanding of the stock market is equally limited. Before his run for president, Trump admitted preferring real estate to stocks, though stocks have historically provided better returns. He proclaimed stocks were overvalued in both 2015 and 2016, and he talked about “very scary scenarios” for investors. Objectively speaking, this was not true. Anyone who sold off based on Trump’s say so is poorer for it today.
By Wednesday morning — when the markets were closed for the funeral of former president George H.W. Bush — Trump tried to calm things down. He took to Twitter and claimed Xi’s government was sending “very strong signals” that the two countries would come to an agreement. One can only hope, but it doesn’t take much know-how to know Twitter is hardly the place to conduct international diplomacy.
Trump pitched himself to gullible voters as a business genius, something that was all but laughable to anyone who actually understood how business worked. He inherited the bulk of his money and connections, two things that did not prevent him from taking his companies into bankruptcy multiple times. His comeback in the 2000s was almost certainly the result, not of unique business insight, but of some combination of marketing mythology enabled by “The Apprentice” and a willingness to engage in deals that look suspiciously similar to cash laundering with an international assortment of shady kleptocrats.
In Trump’s view of the world, he is responsible only for success, not for failure. He got away with this insistence when he ran the privately owned Trump Organization, mostly because no one cared much about him at all outside of a certain tabloid stardom. But he’s in the White House now, and he publicly claimed credit for the stock market’s success. He can hardly turn around and deny he has nothing to do with it now that the hot streak has cooled. It’s Trump’s stock market now. Let’s hope he can keep it.