Let me just dispense with the elephant in the room upfront: The Trump administration moved forward with tariffs on an additional $200 billion in Chinese goods on Monday evening and those duties will go into effect on September 24.
On Tuesday morning, China retaliated as expected, announcing differentiated levies on $60 billion in U.S. goods.
Both the U.S. President and Wilbur Ross (with the latter speaking to CNBC on Tuesday morning), made it clear that China's retaliatory measures will be viewed by the administration as unacceptable and as cause for a third wave of tariffs on $267 billion in additional Chinese imports. That prospective third wave would take the total amount of goods subject to tariffs to ~$500 billion. More to the point, the U.S. would be taxing everything China ships to America.
In a note out just after midnight, Goldman put the odds at "slightly greater than 50%" that the Trump administration goes all in on China by 2019.
At the time of this writing, the market reaction is muted. This was easily the most well-telegraphed escalation yet. At least a half dozen mainstream media outlets confirmed the escalation over the weekend and the President's tweets clearly indicated he would be moving ahead irrespective of Treasury Secretary Steve Mnuchin's efforts to restart negotiations.
I'll get into the specifics on that in another article, but here I want to focus on something tangential. Specifically, I want to address whether the buyside is overexposed and underhedged with U.S. stocks still sitting near the highs and as geopolitical risks mount.
Last month, as U.S. stocks (SPY) pushed to new highs amid a fleeting dip in the dollar and an equally transient rally in emerging markets, I likened the price action to the "melt-up" global equities experienced in January. At least one commenter here asserted that
