Donald Trump can’t have his tariffs and the stock market too

This story is published in a content partnership with POLITICO. It was originally reported by Ben White on politico.com on December 19, 2018.

US President Donald Trump loves two things very much: tariffs and a rising stock market. It’s becoming increasingly clear he can’t have both.

Free-traders inside and outside the White House are now hoping that Trump’s love for new highs on Wall Street will temper his commitment to trade battles and help bring the current fight with China to a soft landing rather than total war next year.

“I think Trump the Dow Jones Man is ultimately going to eat Trump the Tariff Man,” said one former senior administration official intimately familiar with the president’s stock market obsession, citing Trump’s touting of a recent agreement to hold off on increased tariffs after a dinner with Chinese President Xi Jinping. “What he agreed to after that dinner had basically been on the table for two years. He knew he had to give Wall Street something.”

Both markets and Trump are fixated on the Federal Reserve this week, with the central bank expected to raise rates by another quarter point on Wednesday. But no matter what the Fed does, investors early next year will pivot to the showdown between Trump and the Chinese. And pressure from Wall Street could push Trump to cut a deal.

“The question is, what is Trump’s pain threshold? And what is China’s pain threshold? It’s almost like two cars zooming toward each other. Which one is going to turn first?” asked Stephen Moore, visiting fellow at the Heritage Foundation and an outside Trump adviser.