Trade Wars
The President of the United States has recently raised tariffs yet again on Chinese products entering the United States, has demanded that US companies cease doing business in China, and has asserted that he has the right to enforce the latter.
China is an ancient, vital, enormous, and proud nation. At various times in world history, China has occupied a major place on the world’s stage, including periods of empire and global domination. While China fell into relative decline beginning with the European Renaissance through the Second World War, that began to change rapidly in the past decades. No one, certainly not Donald Trump, will deny China and its people their rightful place on the world’s stage. The Chinese people, with their industry, now provide a vast array of goods to people all over the world, who benefit from their work. I personally deeply appreciate those products, often produced by workers who endure overly long working hours. I am not against tariffs – I am against arbitrary tariffs. Any rational tariff system should be global in nature, and should ensure a level playing field by all countries in labor, environmental, and social aspects.
As I have previously noted, President Trump’s use of tariffs to restrict, rather than expand, trade is a perversion of the original intent of Congress’s granting of tariff authority to the President. Similarly, his threat to use a 1977 law granting the President power to restrict trade with military or security threats and apply it to China, one of our largest trading partners, is again a perversion of the original intent of that law. It is increasingly vital that Congress re-claim authorities that it has previously granted the Executive, and ensure that the President of the United States, whoever it may be, never again has unilateral power to effect decisions in areas that are rightfully Congress’s domain.
Donald Trump does not own bonds – he is traditionally not a lender but a debtor, and has defaulted in the past on a number of his loans (and then illegally written them off as tax losses rather than defaults). Donald Trump does not generally own stocks – he is primarily invested in his own family business licensing the family name to others with superior skill in real estate development. Donald Trump, therefore, does not share the interests of New Capital’s clients who have wealth accounts, retirement accounts, education accounts, charitable accounts, and more invested in securities around the world.
With the uncertainty and volatility presented by the President of the United States, your highly diversified portfolio is the very best answer available in modern finance to the questions brought on in the current investment environment. And while there are widespread concerns over the possibility of recession, I note that there are significant segments of the markets, including value stocks and international stocks, that are trading at attractive prices, and to which your portfolio is allocated. On the other hand, US stocks in general and global bonds appear to be substantially more expensive.
If you wish to (re)test your “risk tolerance” with our short quiz, please let me know, I will be happy to email it to you and I will receive your results immediately. I remind you that we have no direct control over the President of the United States, the Chinese government, or any other major entity. We do, however, have control over your portfolio, and can make changes at any time based upon changes in your own personal financial situation.
As always, thank you for your confidence and trust. It is an honor and pleasure to work for you.
Leonard Golub, CFA
Fiduciary Financial Advisor