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Trump wasn't as dovish as he's being made out to be
🕑 Added 2025-04-23 21:23:08 +0000 UTCAccording to the Twitterverse, Trump said a few things of note at the Oval Office briefing after swearing in the new SEC Chair.
1) Not firing Jpow
2) Will not play "hardball" with China
3) Tariffs on China will not remain at 145%
The headlines: "Trump backs off on China." "Trump caves, stocks moon." "Tariffs on China will be reduced; buy buy buy."
The reality: As you'll see in the above video (clipped from the $3K Challenge for this week), Trump wasn't quite as dovish as people are implying.
1) Not firing Jpow: This one is true, and in my opinion, is indeed bullish. Firing Jpow would have undermined the legitimacy of the Fed as an independent institution. If Trump fired Jpow, the Fed would become an extension of the president, and countries would not take our bonds as seriously.
2) Hardball: A reportr asked Trump directly if he would "play hardball with China and mention Covid." Trump said, in a mocking tone, that he would not call Xi and say he's playing hardball. It was a very direct question with a precise answer to the hardball statement specifically. The market is viewing this as Trump expressing his intent to soften his overall approach to China, and I am not seeing that. I am seeing him posit against the use of the term hardball, and instead be "nice" (ie cordial) with China in making a deal.
3) 145% tariffs: Trump explains that these tariffs are the product of many features, including baseline tariffs, fentanyl penalties, and sector tariffs. Trump explained that tariffs will not remain at 145% (after a deal is made), but that tariffs will never be 0%. 6 months ago, this would have been seen as a very hawkish stance. But now, it's being considered a walkback. I disagree with this; I believe Trump always intended to walk tariffs back down after a trade deal- that's the point of making a deal. I completely disagree with the market that this is a cave.
My play: An Iron Condor with a bearish skew.
I believe the market will flatten out and drift for a little while as governments proceed with negotiations. This will take a long time, and we will have some violent ups and downs. But overall, playing an iron condor with the puts side a little further OTM than the call wing out to be a safe way to benefit from high VIX.
