Tariffs and Ketchup
11 / 01 / 18

Tariffs...and Ketchup?

What do tariffs and ketchup have in common? Although this question sounds like the beginning of a bad joke, the answer is, “quite a lot.”

In sixth grade, the best time of the day was eating lunch in the cafeteria with my friends. Along with socializing, lunch break presented a time to douse whatever food I brought that day in ketchup. On the tables in the cafeteria sat beautiful glass bottles of ketchup ready for consumption. One fateful day we walked into the cafeteria and much to our chagrin the school had replaced the cherished glass bottles with repulsive plastic bottles of watered-down ketchup. In order to demonstrate our displeasure with the change, students began squeezing ketchup out of the bottles all over the cafeteria. Unsurprisingly, the next day, all of the ketchup bottles were missing; they had been removed by the administration. Per our principle’s demands, we cleaned up the cafeteria and exemplified good behavior in the hopes of re-establishing ketchup privileges. Much to our relief, soon the plastic ketchup bottles were returned to all the tables. After experiencing ketchup depravity, we did not care that the bottles of ketchup were inferior to the first, we rejoiced in the simple existence of ketchup.

In the last three years, the Dow has jumped an incredible 7,000 points and the S&P 500 nearly 700 points. If the market were my middle school, everyone has been enjoying top quality ketchup in attractive glass bottles for the past few years. Earlier this year, the United States levied hundreds of billions of dollars in tariffs on China. Upending the status quo is never received well on Wall Street, and the markets reactionarily reeled. In other words, the market reacted like my classmates did by spraying ketchup all over the cafeteria in contempt. When a deal is reached in the currently ongoing trade talks between the United States and China, a new normal will take shape. Then, the markets can revel in the reality of having a stable ketchup situation; even if we aren't pouring ketchup out of elegant glass bottles anymore.