How Should Investors Handle the Trump Trade War? Dear Reader, The markets threw a hissy fit on Monday. The reason? President Trump initiated tariffs on Mexico, Canada and China. The major indices were down sharply to start the morning, but they clawed back a bit as news broke that the Mexico tariffs would be put on hold (the Canada tariffs were paused on Tuesday). Ultimately, the S&P, Dow and NASDAQ ended the day down 0.8%, 0.3% and 1.2%, respectively. But the fact is President Trump shocked everyone – myself included. Still, the market’s initial reaction to the news on Monday was overblown – yet another example of Wall Street’s tendency to “react” first and “think” later. So, while the current tariff saga is still ongoing, I want you to understand something... This short-term volatility can be unnerving, but I don’t want you to worry too much. So, in today’s Market 360, we’ll recap what has happened in the tariff saga so far. Then, I’ll elaborate on why investors need to avoid distractions like this – and where they need to focus instead. What's Happening With the Tariff Saga On Monday, President Trump implemented 25% tariffs on the U.S.’s two biggest trading partners, Canada and Mexico. In addition, he also announced 10% tariffs on China. All the tariffs were set to go into effect on Tuesday, February 4. But ultimately, both Mexico and Canada came to a last-minute deal with the Trump administration. And as a result, the tariffs were delayed by 30 days while negotiations commence. Initially, stocks were down sharply at the open as folks once again chose to “react first” and “think later.” But by mid-morning, it became clear that the tariffs were part of Trump’s negotiation tactics. Mexico’s President Claudia Sheinbaum spoke with President Trump on Monday morning in an effort to delay the proposed tariffs. Mexico agreed to boost its border security immediately, posting an additional 10,000 National Guard members to Mexico’s northern border to help halt drug trafficking. As a result, negotiations will persist between the U.S. and Mexico. On the other hand, Canada didn’t handle the tariff threats as well as Mexico. It took two phone calls between Canada’s Prime Minister Justin Trudeau and President Trump before the two sides came to an agreement. Canada plans to add more border security resources as well as appoint a new fentanyl czar while negotiations take place between the two countries. For now, the Chinese tariffs remain in effect. Now, stocks have pared those initial losses since learning of these developments. Folks are beginning to realize that President Trump was not kidding when he initially made these threats. So, if this is how he treats our neighbors, I suspect that other trading partners will grow even more nervous. But I have been on record saying that I believe Trump’s tariff threats are part of his negotiation style. He wants his counterparts to be uncomfortable when entering a negotiation. That way, he can get a better deal. As far as other countries are concerned, President Trump is attempting to level the playing field. Consider this: When the U.S. imports a car from Europe, there is a 2.5% tariff. But when Europe imports a car from the U.S., it’s a 10% tariff, and on a truck or SUV, it’s a 20% to 25% tariff. Essentially, President Trump wants Europe to either cut the tariffs on American goods or the U.S. will raise its tariffs to meet their level. | Recommended Link | | | | Luke Lango’s Great American Crypto Project is NOT just another newsletter… This is a quant-based algorithm Luke uses that is designed to identify a predictable pattern where cryptos could soar 10X, 50X even 100X in 90 days or less… We’re talking about the opportunity backtests show could turn a $1,000 investment into $21,330… $55,370… Even $116,140… In the matter of weeks! This is a very high-demand opportunity, so I’m not sharing all the details in this message. If you want in… Go here for more information. |  | | What Trump Really Wants In addition to border security, President Trump will likely want more U.S. companies to “onshore” their manufacturing operations from Canada and Mexico. It has been one of his aims to end the more than two-year manufacturing recession in the U.S. and reignite overall economic growth. Interestingly, the latest ISM manufacturing report showed that U.S. manufacturing actually expanded in January, with PMI rising to 50.9 last month. Any reading above 50 signals expansion. I should also add that incoming Commerce Secretary Howard Lutnick loves to point out that the U.S. had tariffs before it had income taxes. In other words, Lutnik is insinuating that higher tariffs could help reduce and/or eliminate income taxes. So, higher tariffs could help pay for the federal deficit and reduce the tax burden for working Americans. Now, going forward, there are two ways the tariff situation could play out… One, there will be a lot of companies onshoring their operations in the upcoming months, triggering an economic resurgence – and President Trump will go down in history as a great leader. Or two, the onshoring does not happen and the tariffs become inflationary and squelch economic growth. Tariffs and Inflation In regards to tariffs and inflation, I’ve received questions about this over and over… So, let me be clear. As of right now, there are only tariffs on China. And China has responded with a series of minor moves. That includes a 15% tariff on U.S. coal and liquefied natural gas that will begin on February 10, as well as a 10% tariff on American crude oil, farm equipment and select autos. The country also announced an investigation into Alphabet Inc. (GOOG) over alleged antitrust violations. The little part that most of the media isn’t reporting, however, is that Alphabet withdrew Google’s search engine in China back in 2010. In other words, these moves are for show. The China angle is a different ballgame since you are dealing with two major powers (with two strong leaders). I suspect both sides will trade barbs but ultimately come to the negotiating table. Given what’s happened so far, I don’t think the tariffs will be inflationary, since the U.S. dollar is so strong against the Chinese yuan. Also, President Trump made it clear in his inauguration address that he wants to bring inflation down for the American people – and many economists believe he can do that. Economists who recently participated in The Wall Street Journal’s survey raised their Gross Domestic Product (GDP) forecasts to more than a 3% annual rate and forecast lower inflation for the upcoming year. So, the bond vigilantes’ fear that President Trump’s tariffs would ignite inflation did not spook economists at all. Bottom line: President Trump’s tariff threats are primarily aimed at negotiating better trade deals for the U.S., and many of them may never come to fruition. I suspect that most of the U.S.’s allies will scramble to “make a deal” if Trump implements tariffs with a specific deadline. So, as of right now, I don’t foresee tariffs increasing inflation in the U.S. | Recommended Link | | | | If you have a significant amount of money in the stock market right now – or if you’re sitting on the sidelines waiting to make a move – you DO NOT want to miss my latest research. My goal is to get as many people as I can in front of what’s coming. If you wait until your hand is forced, it will already be too late. You absolutely MUST get on the right side of this thing. Go here now to see my urgent warning. |  | | Don't Let Distractions Keep You From Profiting... Overall, change is hard – and there will be a lot of distractions for the stock market in the near term. Tariffs are just one of those distractions. My advice to investors during times like this is simple, folks. When there is uncertainty, stay disciplined. And if there are fundamentally superior stocks that are caught in the crossfire, it’s a good time to take advantage. In other words, keep your eye on the ball. Folks need to remember that we’re in the middle of the fourth-quarter earnings announcement season. And things are looking fantastic. According to FactSet, around a quarter of S&P 500 companies have released results so far, and of these companies, 80% have exceeded analysts’ earnings estimates. The S&P 500 has posted 12.7% average earnings growth so far, up from forecasts for 11.8% at the end of the quarter. What this tells me is that companies are posting wave after wave of positive earnings surprises. I continue to expect wave after wave of earnings to come out and literally dropkick and drive fundamentally superior stocks higher. If you could jump into a time machine to the future and look back on 2025, I suspect this year will be one of the most transformative years in our lifetimes. So, I strongly encourage you to not get derailed by distractions like the tariff pushback or any other “noise” that can distract investors. The fact is we’re on the verge of what could be an incredible U.S. economic resurgence – and a very prosperous time for investors. In fact, I recently told my Growth Investor subscribers about one of the biggest predictions in my 47-year career... It is a massive event set to take place and it could bring a slew of hypergrowth stock opportunities over the next couple of years. It will create massive wealth for those who are on the right side of it. The media hasn’t said a word about it. But I put together this short video to reveal all the details. (Already a Growth Investor subscriber? Click here to log in to the members-only website.) Sincerely, | .png)
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