Kevin O’Leary is a Canadian businessman, author and television personality. He co-founded O’Leary Funds and SoftKey. He is famous for being on the Shark Tank TV show. Kevin has a net worth of over $400 million.
China also has higher tariffs. China had developing nation status with the WTO.
The U.S. is likely to maintain a trade deficit with China even if all tariffs are removed. Why? The U.S. is the largest economy in the world, and the American consumer has a ferocious appetite for goods and services. The U.S. economy simply consumes more than it exports. This is not going to change anytime soon.
Tariffs are a different deal. They are imbalances. Take the automotive industry, for example. The Chinese and Europeans charge higher tariffs on U.S. cars coming into their markets than corresponding Asian and European automobiles entering the U.S. markets. This has been going on for years.
For decades, no U.S. president has had any interest in getting into a skirmish over this, as it was far more expedient to “keep the peace” rather than get into an escalating trade war that may cost American jobs, reduce productivity and maybe cause creeping inflation.
Why take such a risk? No previous administration did, and the gap between U.S., Chinese and European tariffs continued to grow.
Ignore the noise and watch the policy.
The policy is crystal clear. Listen to the messaging coming from Commerce Secretary Wilbur Ross, Director Larry Kudlow and Treasury Secretary Steven Mnuchin. These are competent managers tasked with executing directives. They and their staff have delivered deregulation and tax reform and are now focused on trade.
Their message is clear. They are going to keep ratcheting up tariffs until the eurozone and China come to the table. They care about the North American Free Trade Agreement (NAFTA) and the Asian trade protocol, too, but these have been pushed to the back burner while they focus on the big dogs, China and Europe.
If you listen and believe the noise, this is economic suicide and will result in the end of the free world as we have known it.
So why has the market not corrected, and why have many stocks continued to hit all-time historic highs? Because the potential to equalize tariffs has such tremendous economic upside for the U.S. economy, investors are willing to put up with pain even if the chance of success is only 50 percent or less.
How much pain? A lot.
[Germany] is rumored to be bringing a deal on auto tariffs between the two countries when they meet at the White House soon. This is proof that if you don’t ask, you don’t get. I (Kevin O’Leary) am going to go long on the U.S. auto sector going into that dinner.
My (Kevin O’Leary) bet is that the strategy is about to start paying dividends — the equalization of trade tariffs.
Stock Market Reactions Year to date
China’s main stock exchange dropped 8% in June. It entered a bear market, falling by 20% from its peak earlier in 2018.