Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

Today’s Agenda

  • Trade wars and stocks
  • Big Government’s comeback
  • Grading the ECB
  • Bitcoin bloodbath
  • The World Cup’s costs and benefits
Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

Maybe Trade Wars Are Bad and Easy to Lose

(Bloomberg Opinion) -- An old Wall Street saw says “Buy on the sound of cannons, sell on the sound of trumpets,” meaning stock traders see wars as buying opportunities. The story may be different if those cannons are aimed at their wallets, however.

Until recently, President Donald Trump’s waving of the trade-war stick at China and various allies has generally elicited stock-market yawns. But Trump's new tariffs on Chinese goods today may have been a hot pot of coffee. China fired back with massive tariffs of its own, and Trump has threatened to retaliate for China's retaliation. 

Suddenly the trade wars seem to matter a bit more to stocks; the S&P 500 fell about one percent before recovering at the end of the day. And trade wars matter in some quarters more than others. Qualcomm Inc.’s pending merger with NXP Semiconductors NV is suddenly complicated, notes Alex Webb. China’s government is telling big U.S. companies doing business in China to "buckle up" should Trump follow through on his anti-trade vows.

Trump’s former economic adviser, “Globalist” Gary Cohn, has said trade wars could cost the U.S. economy $2 trillion – wiping out the Trump administration’s claimed tax-cut boost. That may overstate the damage, writes Stephen Gandel – but not by much. Comparing the market valuations of big-company stocks against those of small companies – which you’d expect would feel a trade war less – Steve suggests trade agita might already have shaved $1 trillion from big-company values:

Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

And the way companies have spent their tax cuts – on buybacks and mergers rather than investment and hiring – just so happens to be what a company would do if it was worried a trade war might blow up in its face, notes David Ader.

Trump seems to pay attention to the stock market, and too much howling there could make him cool his trade cannons. But maybe it’s better to hide from them now and sound the trumpets later.

Big Government’s Not Dead Yet

Who said, “The era of big government is over”? Was it:

a – Ronald Reagan

​​​b – George H. W. Bush

​​​​c – Bill Clinton

d – Herman Cain

The answer is c, Clinton, which may surprise you; it's something you'd expect a Republican to say. But it reflected the zeitgeist when Clinton said it in 1996, 16 years after Reagan’s small-government revolution. And now, in another surprise, with a different Republican in the White House, big government is coming back.

Again, this may seem incongruous; Trump has been hacking away at regulations and the social safety net. But he's also using government to intervene in free markets and prop up dying industries.

Meanwhile, socialism is making a comeback in America’s popular imagination, notes Noah Smith:

Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

Maybe so many decades have passed since Americans elected Reagan to fight big government that we forgot why we ever worried about it. Maybe it was the exciting presidential run of the openly socialist Bernie Sanders. Maybe the GOP's relentless attacks on government services make people appreciate them more. And maybe problems like yawning inequality and a dismal health-care system just obviously call out for big-government answers like, say, a guaranteed job or Medicare for all. It might not be long before another president openly embraces Big Government again.

Easy Does It, ECB

The European Central Bank is taking its sweet time pulling the props away from Europe’s economy, and that's a good thing, write Bloomberg’s editors. The economy looks like it could use some help again – although European governments could stand to learn to handle their own problems.

Bitcoin Bloodbath

Bitcoin prices have plunged by two-thirds over the past six months or so, and there’s no sign of a bottom yet. Lionel Laurent points out that the cryptocurrency’s whole investment thesis has so far been based not on the growing adoption or utility of bitcoin, but on finding a greater fool to buy your bitcoin. For some reason, those fools have gone missing.

Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

The World Cup: A Cost-Benefit Analysis

Today was the second day of the World Cup in Russia. Morocco wrecked my temporarily Bloomberg LP-leading bracket by forgetting how to score, in its opponent’s goal anyway. 

The fact that I noticed that during my work day is a reminder that big sporting events like these can be hell on productivity. Maude Lavanchy and Willem Smit try to figure out just how much economic value these things destroy

But hosting the World Cup in 2026, as the U.S. will do with Canada and Mexico, won’t cost the country much, points out Conor Sen. In fact, it could be a big moment for the U.S. to rebuild the bonds with its neighbors and the world that Trump has been busy trying to break.

Leonid Bershidsky and Mac Margolis, on the other hand, wonder how much the World Cup even needs the U.S.

Chart Attack

Tara Lachapelle and Elaine He look at all the crazy places Media Mega Merger Madness could take us, with the Media Merger Wheel™️:

Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

Citigroup is increasingly getting into some risky business, writes Stephen Gandel.

Trade Wars Don't Matter, Unless You Think $2 Trillion Matters

Speed Round

A Bernie Madoff feeder-fund manager has come out pretty sweet. – Joe Nocera

OPEC’s meeting next week can’t paper over its structural problems. – Liam Denning

Not even Oprah can solve Apple’s entertainment problems. – Shira Ovide

We should change securities laws so everybody can invest like Harvard. – Nir Kaissar

The Justice Department’s inspector general report mainly revealed irony. – Eli Lake


Time Warner’s getting a new name. Paul Manafort’s going to jail. Trump blew up an immigration compromise.


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Note: Please send goals, suggestions and kicker ideas to Mark Gongloff at


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