Mish Shedlock sees more tariffs but fewer rate hikes on the way

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Updated December 1st, 2018 (expands first quote to include possibility of a minor deal) - In his latest interview with Jim Goddard, economist Mish Shedlock suggests that the best outcome of the Trump-Xi dinner summit this weekend would be a minor deal that holds off on new tariffs for a while. However, the soft but outspoken economist doesn't expect a deal.

My own expectation is there is no deal, or perhaps a minor deal that lets them hold off on new tariffs while they work on it

Mish goes on to suggest that Trump is determined to raise tariffs on China and cars, and that is unsettling the markets. 

Click to listen to the interview

There is a 25% tariff already on truck and SUV imports into the US which Mish believes already gives US automakers a boost:

That's the only thing keeping U.S. truck sales humming along. We have these monster big tariffs on the rest of the word. That is why Ford and GM sell all the trucks they do.

But Mish believes the recent Trump tariffs and threats of more tariffs are backfiring:

All this kind of talk can do nothing but rattle the market. CEOs are going to hear this message and think more tariffs are coming...look at what tariffs have already done to GM. We force up the price of steel and aluminum and the biggest user of that is the auto industry.

Because Europe and Japan have not retaliated by slapping on their own steel and aluminum tariffs, Mish believes those two economies are now better positioned to compete with the US.

Trump does not see himself as part of the problem, he is.

Mish also takes a swipe at Apple's new iPhone pricing strategy, suggesting that it is leading to some problems:

They are offering marginal improvements for the average person and they have run into kind of a brick wall here as to whether or not people think they need a new phone.

With respect to the pace of interest rate hikes, Mish agrees with the notion that the Fed is going to slow down. He suggests a couple of words in Fed Chairman Powell's Wednesday speech represent a big modification of what he said previously:

Last month he said the Fed was nowhere near neutral and he came out and said we are very close to neutral now.

The implication is that the Fed will get to neutral soon and stop hiking. Investors will now have to figure out what close means. Is it one hike or two? Mish concludes by suggesting we are close to the end of the rate cycle.

So there you have it. Another voice who believes the sun is setting on the Fed's tightening adventure. As we have been saying over the past couple of weeks, if that is the case, the sun should soon be rising for gold.

 

 

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