President Trump is often portrayed as being mercurial and transactional, but his economic policy framework flows from tangible principles that he has venerated for decades. For a start, Trump maintains the U.S. has been too magnanimous in providing other countries with access to the American consumer and our defense umbrella. He believes this should be conditional on balanced trade and a level playing field, otherwise tariffs are justified. Similarly for defense, where several Presidential administrations since Eisenhower’s including those of Kennedy, George W. Bush and Obama have commented that numerous NATO countries are free riding on American mettle. Further, Trump deplores the decline of domestic manufacturing jobs and is resolved to propel a revival.

Reasonable people can debate the above framework. There remains many open questions about tariff policies and the global economic order that Trump has in mind. This is important for investors because Trump’s trade policies will be key drivers of discount rates, free cash flow (FCF) and market volatility over the next four years.

In this paper we examine tariffs from the American perspective, look at the China’s leading role in the ongoing trade war and discuss the macro and market consequences and implications for investors.