Darth Orange: Trade war shows Donald Trump has embraced the dark side

Many are calling the current market turmoil unprecedented, but a long time ago, in a galaxy far, far away, a similar situation unfolded in which trade became a weapon of political manipulation.

The opening crawl of Star Wars: The Phantom Menace reads: “Turmoil has engulfed the Galactic Republic. The taxation of trade routes to outlying star systems is in dispute.”

Ian McDiarmid as Palpatine in Star Wars.

In the film, the Galactic Republic, under Senator Palpatine, imposes tariffs on interplanetary trade routes, prompting the Trade Federation to retaliate with economic and military warfare – including a full-blown blockade of a planet. Thankfully, we’re not at that point... yet.

The Phantom Menace mirrors today’s reality, where – much like Palpatine – Trump has turned trade into a weapon. But his so-called “artful deal” has spectacularly backfired in what is proving to be the worst presidential sequel for markets in history.

Last week’s Rose Garden tariff announcement erased $8.2 trillion in stock market value – more than was lost during COVID or the worst week of the 2008 financial crisis.

On Thursday and Friday alone, the S&P 500 plunged over 9 per cent, marking the fourth-worst selloff in history, and is now on the cusp of entering a bear market.

Fear is the path to the dark side. Fear leads to panic selling. Selling leads to losses. Losses lead to suffering.

Robert Baharian, Director of Longview Capital.

The ASX followed suit on Monday, wiping $100 billion from our bourse in its worst day since the pandemic. This kind of swift, severe decline so close to record highs has only happened three other times in history – each during major market crashes.

The silver lining? Downturns like this offer young investors a rare chance to buy stocks at fire-sale prices, a springboard to long-term wealth, assuming you’ve got the cash reserves to go shopping.

Unfortunately, in a case of reverse Robin Hood, March saw retail investors buying stocks at a record pace while hedge funds were offloading them just as aggressively.

It’s a costly reminder of the danger of “buying the dip,” or as traders say, “catching a falling knife” on the way down instead of waiting for a bottom to form – a lesson I learned the hard way.

Trump’s tariffs may be sounding somewhat familiar to Star Wars fans.Credit: Disney

Timing the market isn’t art; it’s science. “There are two things to watch for before putting money to work in the market,” says Tony Sycamore, technical analyst at IG Markets.

“First, is a ‘bullish divergence’ when the rate of selling slows. The second, a reversal in momentum, for example, when the market opens lower but closes higher, showing buyers are stepping in.”

Legendary trader Lance Breitstein calls this strategy buying “the right side of the V” – waiting for the market to bottom out and start a short-term uptrend before buying. You may not time it perfectly, but you minimise the risk of being caught in another big fall.

How much further the markets will fall is anyone’s guess. But when headlines about market turmoil start saturating the mainstream news cycle, it’s usually a contrarian sign that the bottom is close.

“I suspect we could see the bottom within the week,” predicts Sycamore. “The volume of shares traded over the past few sessions has broken records. It sets the scene for a vicious squeeze on any good news.”

So don’t panic.

For many young investors, this has been the first market crash they’ve lived through, but despite the scary headlines, I believe it’s just a matter of time until Trump caves to pressure from his billionaire backers and markets recover, like they always do.

“Investors should resist the urge to act on impulse. Discipline is key. Stick to a long-term plan, understand your risk, keep cash on hand, and seek good guidance when needed,” says Robert Baharian, Director of Longview Capital.

“Fear is the path to the dark side. Fear leads to panic selling. Selling leads to losses. Losses lead to suffering.”

The real danger for markets isn’t the short-term volatility, but the longer-term risk of having an economically illiterate leader who uses ChatGPT to write policy, tariffs penguins, and is willing to tip his own economy into recession for an ideological goal.

Just as Senator Palpatine turned out to be a far more dangerous person than voters thought, I suspect many Americans are now worried they accidentally elected a more orange Darth Sidious.

It’s likely this trade war is just the first episode in what will be a four-year-long saga to forget. A New Hope can’t come soon enough.

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