So it sounds like Trump is intent on going through with imposing or increasing tariffs on its main trading partners: Canada and Mexico, as well as China. He's threatened China with 60% tariffs on day one of his term...
But I didn't expect him to use combatting drugs as the excuse....? I'm fairly sure there's no integrity in the reasoning, that's just a plausible excuse to justify a policy Trump was intent on implementing whatever.
In the short term at least expectations around Trump's economic policies seem to be benefitting America and to the detriment of its trading partners....
Other currencies hit.....
Trump's tariff announcements seem to have been sufficient to throw foreign exchange markets into disarray, and it would seem that the currencies of those countries threatened with US tariffs have been hit the hardest...
On the back of just the potential of tariffs the Canadian dollar dropped by 1.4% and the Mexican peso fell by over 2%. In China, the People’s Bank intervened to stabilise the yuan, which had dropped by 0.4%
The Powerful US Dollar...
Meanwhile the US dollar has surged nearly 3% since the election, driven by speculation that Trump’s mix of tax cuts and protectionist policies will continue pushing it higher.
NB Trump is really up for this, he's threatened BRIC nations with 100% tariffs if they try creating a currency to rival the dollar...
I'm not sure that would be wise, just given the sheer population imbalance and the rising middle class markets in India, China and Brazil. There's a lot of money to be made by trading with each other, and Europe of course.
But are tariffs the solution to America's economic woes...?
Although Trump’s tariffs didn’t explicitly target Europe, Japan, or South Korea, their stock markets also suffered, reflecting broader fears of a global trade war disrupting supply chains and profits.
And I don't think this can be good for everyone, it's going to hurt the USA as well as Europe and wider markets, especially those countries which rely on exporting products.
The auto industry seems to have taken a HUGE HIT. Shares in major manufacturers like VW, and Nissan— with significant production operations in Mexico have plummeted. In a single day, over €10 billion was wiped off Europe’s largest carmakers’ market value.
Uncertainty = good for crypto...
We don't know how bad future trade wars are going to be, or what the impacts will be, this means a lot more uncertainty going forwards, which could potentially be good for crypto, which can act as a hedge for any nation against currency fluctuations.
Wouldn't be amazing to see nation states to start snaffling up billion dollars of BTC for just this reason, bizarre, very bizarre, but profitable for us handful of people who got in early!
Final Thoughts... who gets hurt the least...?
I mean maybe I'm missing something here, maybe this is a stroke of genius... America has been hurt, relatively speaking, by other countries outpacing its economic growth, so maybe this is all the USA can do: implement a policy which slows its own growth, but slows that of its competitors even more...?
I mean that would be a relative win.
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Folk in the US can look forward to higher prices as they rely on imported goods. It's not going to restore US manufacturing overnight. Does anyone really have answers? I doubt he does as he just goes for what look like easy solutions. If it were that easy then others would have done it.
So very true, we need global solutions to our national problems. Tariffs are just a bit to early 20th century!
Manufacturing was returning to the USA already.
It would be undesirable for all outsourced industries to return to the USA. American labor tends to be high-skilled.
Trump's tariffs are a consumption tax targeting imported goods in the USA. Trump's tariffs will be inflationary. The Fed is going to have to tighten its monetary policy in response to increased inflationary pressures. It seems we have an idea what will trigger the end of the current bull market next year. What the market doesn't know yet is how high the tariffs will be. The US and its trade partners are going to negotiate at some point. The stock market will react to the results of the negotiations whatever they may be.
And for now it's just more of that good old uncertainty! Maybe that's even the plan, people can profit off of uncertainty, after all.
There's definitely money to be made from volatility. The $2 trillion cost cutting plan is wild. Musk has promised the American people "hardship". When there's hardship equities will be cheap and ripe to be picked up by those with deep pockets.
It's going to be carnage in the Srates.
It's going to spread into the rest of the world.
I’m guessing that Trump will give all kinds of exemptions to businesses owned by his cronies and that Canada might end up getting no tariffs at all since our biggest import from Canada is energy. But the whole thing is beyond stupid. We get more than half of our fresh fruits and vegetables and massive amounts of parts critical to our nominally built-here auto industry from Mexico.
NAFTA has been an economic success story. Most Trump voters are going to be unpleasantly surprised. Most of the rest will just have an unpleasant experience.
Maybe it is all just posturing, with the hope of getting better trade deals!
I'm no economy expert, but raising tariffs is usually just a patch over an open wound... It can't fix the "local" economy overnight, it's just trying to weaken other market participants... That being said, others can "redirect" their trading to other places... In the end, it's all about margins and profits...
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True, it doesn't feel like part of a well co-ordinated long term plan to manage the US economy, that's for sure!
It's definitely a complex situation.
Trump's approach with tariffs seems aggressive, but it's clear he's aiming to shake up global trade dynamics, though the reasoning behind using drugs as an excuse does feel questionable.
The immediate impact on currencies and stock markets shows just how interconnected everything is, especially with major industries like automotive taking such a massive hit.
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It's not exactly joined up thinking is it, I think it's just manouvering to get a better deal. If his bluff gets called the US is fucked.
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