Trump Just Keeps Playing With the Banks' Money Amid Trade War Saga

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Trump again made comments about the trade war last Thursday sending the market down once again. For investors, this is becoming a major pain, for traders it has been far more of a boon. For the past year a pattern has emerged, Donald Trump says something to stoke fear on the trade war and the market goes red, traders by the drops and the market makes a slight recovery... rinse and repeat. 


Some Things Never Change

Thursday on CNBC, Trump said he wasn't worried about a trade war because the S&P 500 is doing so well that he is "playing with the bank's money" when it comes to his trade war. Donald Trump is very familiar with playing with the bank's money since his sole business strategy was to borrow mass amounts of money from the bank, use that to build his projects and then subsequently default on the loan.

Hence, the reason he sought help from the Deutsche Bank when no US banks would give him any more loans. Trump sees the US economies strength as his bank, his loan that he can squander. The problem for Trump with U.S. debt, which is currently over 21 trillion dollars and increasing, is you can't just walk away in default. Nevertheless, this doesn't stop Trump from engaging in pointless trade conflicts or diplomatic follies, losing repeatedly and claiming a win. 

The U.S. traditional allies have lost patience and have decided to draft their own trade deals now leaving the U.S. out in the cold. The European Union and Japan have now signed a trade deal, a new Trans-Pacific Partnership which the US is no longer a part of, which eliminates nearly all tariffs between them.

Economic experts are rightly characterizing this as one of the biggest trade deals in history as the area affected accounts for one-third of the global GDP. Noneffective U.S. Treasury secretary Steve Mnuchin weighed in at the G20 summit in Buenos Aires this weekend, stating that he is "very hopeful" free trade deals can be brokered independently between the United States, Japan and the E.U. even though admittedly he didn't bother to actually review the deal yet.

Delving further into his personal fantasy where the U.S. still has good faith in trade agreements he went on to say, "I'm encouraged by the EU's trade agreement with Japan,". Then as if he was negotiating anywhere other than his own mind added, "This has to be about dropping non-tariff barriers and subsidies as well. This has to be a deal with its entirety,". EU trade commissioner, Cecilia Malmstrm, was quick to remind us all that Trump has "closed the door" on any talks of trade with the E.U. Despite this the E.U. is willing to negotiate on lowering some tariffs, though I personally believe she was just being diplomatic and has no interest in negotiating deals that won't be kept.

Some Things Do Change and Trump is Oblivious

Trump is, of course, completely oblivious to all this. He is far too busy claiming innocence in a fresh Twitter (NYSE:TWTR) rant every few hours. Trump also has the mistaken idea that the U.S. economy is invincible and the very center for the world's trade. At one point in time, this was probably true.

In the year 2018, the world is vastly different and the TPP that Trump pulled out of last year was intended to address just that. The TPP was an agreement between countries to mutually benefit trade and eventually eliminate all tariffs between the agreeing countries, the very goal that Trump has claimed and couldn't be further from.

In Trump's mind, there is no such thing as a mutual agreement, there are the screwer and the screwee. You either win or lose, it's all binary, so anything approaching a mutual agreement in Trump's mind is a loss. Discounting the possibility that Trump is more than likely compromised by the Kremlin and thusly railing against the E.U., the only other option is that he plainly doesn't know what he is doing... both are frightening prospects.

So here we are, Trump's bank. That comment may explain the lack of upward movement we are seeing Monday. As stated before traders were eagerly awaiting these Trumpian moments in order to make a quick profit in a pattern that has been going for months. This pattern has held reliably and will continue to do so until it doesn't.

Eventually, institutional investors will get tired of being taken for a ride and as Trump puts more and more pressure on the markets eventually this pattern is going to break. There is only so much time you can watch a ticker get rejected at a high before you start going short, and it isn't much different for market makers, market makers who don't see themselves as a bank handing out loans.

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