Trade War Tactics and the Stock Market

Economists at Moody’s took a look at the timing of the president’s trade tactics and the performance of the stock market:

Contrary to popular belief, the stock market is not synonymous with the economy, but it remains Trump’s main barometer of the economy’s health. Thus, the stock market has become somewhat of a leading indicator of trade policy. When stocks are high, Trump feels emboldened to pursue a harsher stance against China in negotiations.

We mapped Trump’s tariff threats since the beginning of the year against the S&P 500 index’s performance. Trump’s timing is spot-on; he issues tariff threats only when stocks are elevated. His August 1 threat was merely a few days after the S&P 500 index reached a record high. Stocks dipped somewhat at the end of July because of the Fed’s bungled communication of a 25-basis point interest rate cut, but the drop was not enough to deter Trump’s tariff threat.