Wall Street is freaking out over the potential for a president Elizabeth Warren, who has made taxing the wealthy and pushing an expensive Medicare for all health care plan key planks in her climb to the top of the Democratic primary polls.
But it’s Warren’s plans to deal with China trade imbalances that could be equally as de-stabilizing for the U.S. economy and asset markets. In fact, some on Wall Street pontificate a President Warren could be tougher on China than President Trump.
“They [institutional investors] are very worried,” former Trump administration official Stephen Pavlick told Yahoo Finance’s “The First Trade” of the mood on the Street about a President Warren. Pavlick’s expression of concern echoes gloom and doom market forecasts of late should Warren win the White house in 2020. Recently, investing legend Paul Tudor Jones said the stock market could plunge 25% if Warren wins.
Indeed, the growing number of Warren bears on Wall Street generally neglect to mention her views on China as a potential driver of downside market risk. All of their eyes remain fixated on having money ripped out of their pockets to support some new social safety net or corporate earnings pressure from higher taxes. Pavlick, who is Washington policy analyst at Renaissance Macro, correctly calls attention to Warren’s China views, and said it’s a factor investors must not overlook should she go on to challenge Trump for the presidency.
“I think with respect to China that people should keep in mind is that having worked with Elizabeth Warren’s office while I was at the Treasury Department, she is very hawkish on China,” Pavlick says. “I think sometimes there is this misperception out there that China just wants to wait out Trump in the hopes of getting a better deal. But Warren may out-flank him there and not be as willing to remove tariffs or negotiate on sensitive technology issues [involving] Huawei.”
To Pavlick’s point, Warren is a major trade hawk judging by her latest trade proposals released back in July. In what Warren dubbed her “new approach to trade,” the Massachusetts senator sets certain pre-conditions if any country wants to trade with the U.S. Two of them would likely be very thorny for China and may prevent greater cooperation on fair trade: human rights and open negotiating drafts.
“We’ve let China get away with the suppression of pay and labor rights, poor environmental protections, and years of currency manipulation. All to add some zeroes to the bottom lines of big corporations with no loyalty or allegiance to America,” Warren wrote in her trade plan in July.
Added Warren, “We need to completely transform our approach to trade. America enters into trade negotiations with enormous leverage because America is the world’s most attractive market. As president, I won’t hand America’s leverage to big corporations to use for their own narrow purposes — I’ll use it to create and defend good American jobs, raise wages and farm income, combat climate change, lower drug prices, and raise living standards worldwide. We will engage in international trade — but on our terms and only when it benefits American families.”