“It’s a disaster. It’s a trading disaster.”
We told you not to be surprised if President Trump jumped into the fray between Canada and U.S. dairy farmers.
We just didn’t think it would be so soon…
Last Thursday, we told you that Canada is imposing tariffs on ultra-filtered milk made in the United States (“Blame Canada for This New Front in the Global Trade War”).
Major U.S. dairy farmers are already taking a hit.
Trump must have read The Palm Beach Daily that day. Because just hours later, “The Donald” came out swinging…
He told reporters in Wisconsin that Canadian trade practices are a “disgrace.” He also slammed the North American Free Trade Agreement (NAFTA):
What happened to our dairy farmers in Wisconsin and New York State—we’re not going to let it happen. The fact is, NAFTA, whether it’s Mexico or Canada, is a disaster for our country. It’s a disaster. It’s a trading disaster.
Those are fighting words. But here’s the problem…
Canada isn’t backing down.
Canadian Prime Minister Justin Trudeau charged (rightfully) that the United States also subsidizes its agriculture industry. He says he’ll keep the tariffs in place.
That’s setting up a showdown between the U.S. and Canada. If Trump and Trudeau escalate their trade fight, things could get far worse.
Meanwhile, protectionist movements are growing worldwide (more on that in a moment).
That’s why you should pay attention to this growing trend. If you want to avoid losing your wealth, you’ll be wary of adding any international businesses to your portfolio.
Trade Protectionism Intensifies
The battle between U.S. and Canadian dairy farmers is just part of the overall unraveling of world trade. It’s a theme we’ve followed for months in The Palm Beach Daily.
Citizens around the world are electing protectionist candidates to power.
Much like President Trump’s own rise to power, they’re pinning hope on the candidates’ ability to “put the people’s needs first.”
We saw this over the weekend in France.
That’s when nationalist party leader Marine Le Pen advanced to the runoff to elect the country’s next president. She’ll face a centrist candidate in the final round on May 7.
Le Pen has been called the “female Donald Trump” because of her protectionist stances.
She’s predicted the European Union (EU) “will die” and has vowed to take France out of the euro.
Right now, Le Pen trails in the polls. But if she wins the May 7 runoff, she’s promised to hold a referendum on France’s membership in the EU.
France is just the latest example of the growing wave of protectionism…
Last year, Britain voted to leave the EU (Brexit). And Italy ousted its pro-EU government (Quitaly).
In both cases, protectionism prevailed over globalism.
If this trend continues in France, it will threaten the bottom lines of companies that do much of their business abroad.
Exporters Will Be Hit Hard
Multinationals will feel the most pressure in an era of protectionism.
That’s because high tariffs will increase the prices of products they export abroad. And if their products become too expensive, that will hurt sales.
On the other hand, companies that do most of their business domestically will initially thrive. They will be much more insulated from trade restrictions than multinationals.
Our America First Portfolio is stuffed with U.S. companies that do most of their business at home. They will be the early winners if a full-scale trade war breaks out.
Regards,
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. At the end of May, I’m taking a trip through the Rust Belt to get a boots-on-the-ground view of global trade. I want to know if President Trump’s “America First” policies are working on the home front. And I need your help…
I’ll be making stops in Illinois, Indiana, Michigan, Ohio, Pennsylvania, New York, and even Ontario, Canada. I want to hear your stories.
If you’re a small businessperson, own a mom-and-pop store, or are an expert on the local economy, tell us if protectionism is creating a renaissance in your city or turning it into a ghost town. No industry or community is too small. You can reach me right here…
Now on to a special Chart Watch from our colleague Jeff Clark, editor of Delta Report…
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CHART WATCH
By Jeff Clark, editor, Delta Report
Last week, I showed my readers that high-yield bonds are surprisingly resilient. Take a look at this chart of the iShares High Yield Corporate Bond Fund (HYG)…
HYG is trading near its 52-week high. And it’s on the verge of breaking out to the upside of an ascending triangle pattern. This is a potentially bullish setup.
HYG is a leading indicator for the stock market. So if HYG breaks out to the upside, then it supports a rally in the S&P 500 up to the 2,385 level.
This is just another reason to lean slightly bullish on the market right now.
—Jeff Clark
P.S. If you want to follow my daily trading insights, you can sign up for my free Market Minute newsletter right here…
MARKET BRIEFS
Meet SAM: The average bricklayer can lay about 500 bricks per day. That comes out to a cost of about 32 cents per brick (based on a $15-per-hour salary). But SAM can lay about 3,000 bricks per day. That comes to a cost of 4.5 cents per brick. That makes SAM much cheaper than his colleagues. But SAM’s no ordinary bricklayer. You see, SAM is an acronym for Semi-Automated Mason. And he’s about to disrupt the entire construction industry. The SAM robot is already at work on several construction sites in the United States. Go here to see some of the current projects he’s working on. Then tell us what you think right here.
Tech Still in an Uptrend: Companies in the high-tech and internet sectors are still growing in terms of market cap. Among the faster growers are Apple, Amazon, Facebook, Google, and Microsoft. This insightful infographic shows just how high these companies have risen over the past 10 years. If you’re a Palm Beach Letter subscriber, we’ve found an easy way to take advantage of this trend. It’s a closed-end fund (CEF) that owns a piece of every major player in the sector. It yields 6.7%, and we’re currently up almost 8% on the play. PBL subscribers can read our issue about it right here.
Gold-Buying Spree: In March, Russia’s central bank bought nearly 25 tons of gold for its reserves. Russia’s central bank now holds 1,679.687 tons of gold. That’s the sixth most of any nation. Over the past 12 months, Russia has added nearly five times more gold to its reserves than the People’s Bank of China. We’ve been way ahead of this curve. In February, PBL analyst Greg Wilson gave three reasons why central banks are buying up gold. If this trend continues, we could see gold prices soar.
MAILBAG
Editor’s Note: PBD analyst Nick Rokke will be touring the Rust Belt and parts of Canada next month to see how President Trump’s “America First” policies are working. If you want Nick to stop by your neck of the woods, send us your story here…
From Tim W.: Nick, if you’re coming to Illinois, you will probably be visiting Chicago. Come have some pizza and beer at my pizza restaurant in the southwest suburbs. We will talk business and the economy. I’m buying!