Back in the nuclear-fueled ’70s, “China syndrome” was a theory that the world would end with a meltdown from a nuclear reactor tunneling its way through to the other side of planet Earth.
Today, China syndrome could refer to the nearly as alarming fiction that pits the world’s two greatest economic superpowers against each other in a trade war resulting in mutually assured destruction.
News media may be losing its impact, but it apparently still holds sway on Wall Street, where fears of said trade war are causing the Dow Jones Industrial Average to move by hundreds of points in a day—sometimes down, sometimes up—with increasing regularity.
Last Friday, for example, CNBC’s headline was, “Dow falls more than 600 points as trade fears rattle investors.” Later in the day, Business Insider similarly reported, “Dow plunges more than 700 points as Trump-China trade war threats escalate.”
Markets have gone from being almost too calm to being extremely volatile.
But the trade war is still more theory than reality. While we’ve criticized President Trump’s steel and aluminum tariffs, he’s temporarily excluded Argentina, Australia, Brazil, South Korea, Canada, Mexico and the European Union.
In other words, the tariffs seem aimed at China, which does not trade fairly.
China has been the target of President Trump’s ire since before he took office. Almost everyone acknowledges that China has been taking advantage of the U.S., stealing its intellectual property and taking other steps to give Chinese companies an unfair trade advantage.
Whether President Trump’s attempt to address these inequities is the best approach remains to be seen, but he is at least attempting to address them. It began with tariffs on solar panels, continued with the steel and aluminum tariffs, then escalated further with Thursday’s threat of additional tariffs, when the president revealed that he had asked the United States Trade Representative to consider $100 billion in additional tariffs against China.
The stock of companies that would be adversely affected by a trade war with China were especially affected. Boeing and Caterpillar each saw their stock prices fall more than 3 percent.
Fortunately, China and the U.S. need each other. If the man behind the “art of the deal” is indeed a deal artist, the net result could be fairer trade with China, which should give markets a boost.
U.S. President Theodore Roosevelt described his foreign policy as “speak softly, and carry a big stick.” President Trump’s foreign policy does not involve speaking softly and the stick varies in size from day to day.