Get Excited About U.S. Economy And Stocks – Senate To Regain Tariff Powers
What’s up with Friday’s ho-hum stock market reaction to the U.S.-China tariff deal? Forbes provides a good explanation in “Stock Markets Failed To Rally On China Trade Deal, Here’s Why.”
However, that limp stock market response misses the big news of the week that makes the tariff news especially important: The House is about to vote to send the Senate articles of impeachment. That shift of venues could change Trump’s tariff strategy completely, making the outlook for economic growth and the stock market potential ramp up significantly.
The hidden good news behind the tariff deal
Note that Trump’s Phase 1 “win” was increased sales of farm goods. Why? Because behind the scenes are powerful Republican senators who want control of tariffs returned to the Senate chambers, starting first with those affecting farmers and ranchers. In September, senators willingly told The Wall Street Journal about their desires, reported on September 15 (underlining is mine).
“In Sen. Jerry Moran’s home state of Kansas, support for President Trump remains high. But so does anxiety among farmers and manufacturers about the economic fallout from the tariffs Mr. Trump has imposed.
“’This has gone on longer than I think people expected it,’ Mr. Moran said. ‘And so the financial consequences are increasing.’
“Mr. Moran and some other Republicans—including Sen. Chuck Grassley of Iowa, chairman of the Senate Finance Committee—are searching for ways to team up with Democrats to reassert congressional authority over the levying of tariffs. They aim to curb the type of tariff-by-tweet policy-making that has whipsawed markets and stressed U.S. businesses in recent months.
“’The Constitution is very unambiguous,” said Sen. Pat Toomey (R., Pa.), who has proposed legislation that would require the president to seek congressional approval before imposing tariffs. “It assigns Congress the responsibility for regulating commerce with other countries and setting tariffs, and yet we’ve significantly delegated that to the president.’”
Based on those revealed desires, I wrote (September 27) about how impeachment could change those “long-shot” odds into a high probability situation.
“With the House of Representatives expected to vote to impeach President Trump, Senate Republicans will then have the power to find him ‘not guilty.’ In return for that favor, those senators might well extract some ‘quid pro quo.’
“Likely, the ‘quid’ would be a rebalancing of power, with the Senate regaining its traditional and constitutional roles, particularly regarding trade, tariffs and foreign agreements.
“If so… There could be a dramatic improvement in trade negotiations, agreements and (especially) tariffs. Obviously, such a change could remove the current growth inhibitors the economy is dealing with as well as the uncertainty and harm with which businesses and investors have been contending.”
But will Trump play ball?
You bet! Look at the 100% support Trump is getting now by those Republican senators and the plans for a short trial that will find Trump not guilty. In politics, however, compromise is everything, so we can expect that the unwavering support has certain expectations attached.
A reversal of those “emergency” (i.e., non-Senate approved) tariffs within the 2020 election year looks to be high on the list of Republican senators (and most everyone else in the U.S., too). Naturally, the quid-pro-quo will include the presentation of the changes as Trump “wins.”
The bottom line
At last, we have reason to believe that the report of a “great deal” has merit – and that it will, in fact, be implemented. Moreover, the Senate impeachment trial produces the likelihood that more good news about tariffs will be coming.
If that potentially favorable tariff picture begins to be seen as a possibility, today’s popular “slow growth” economy forecasts and “low return” stock market outlooks will be tossed. Therefore, now is a good time to own U.S. stocks.