For over a year now, the market talk has been how the tariffs were just a negotiation ploy. Now, it is like they suddenly woken up. Maybe we should call Wall Street Rip Van Winkle!
Even a casual evaluation of the parties to the "negotiation" would have been viewed otherwise. China is a proud country. They have had their down periods over the centuries when they were dominated by other countries. They would rather cut off their legs versus submit to another round of domination. Trump is a cantankerous guy who always has to win. The tools Trump has used in the past to get his way, such as the leveraging the legal system, just don’t apply in international relations.
Rip Van Winkle (Wall Street) wants the bull market "party" to continue. If the music slows down or stops, employment on the street will drop off. This is Wall Street's biggest fear and is exactly why they want the Fed to "throw more gas on the fire" with rate cuts. So Wall Street has turned a blind eye to the likely danger of a tariff war for a long time.
Add the herd effect, that occurs with group think, and it is clear why Wall Street has ignored the real risk. Almost everyone on the street was talking about how tariffs were JUST a negotiation ploy.
We can only hope the fairy tale of Rip Van Winkle ends favorably.
