Viking Posted December 31, 2016 Share Posted December 31, 2016 I think most people are underestimating the impact Trump is going to have on financial markets when he becomes president January 20. He has stated very clearly that he is going to renegotiate trade deals (TPP, NAFTA) so they are much more favourable to the US. This puts the US on a collision course with other economies (Canada, Mexico, China, Germany etc). For Trump to get concessions he is going to have to show a very strong hand so I expect him to hammer frequently and hard. Speed: Trump will want to move fast given these sorts of things can take a long time to get done. Social Media: Trump will be looking for maximum coverage using twitter to demonstrate his awesomeness. I just do not see how this ends well for financial markets. Thoughts? Please post any articles you come across that cover this topic. Here is an example. If I was Trump and I wanted to get Apple to move iPhone production back to the US I would poke China in the eye. China likely retaliates by poking Apple in the eye. I would be surprised if Apple Has not given this a lot of thought. Here is an interesting article from Michael Pettis: http://carnegieendowment.org/chinafinancialmarkets/66485 LEADERSHIP HAS A COST: And there is no longer any question for some Americans that mercantilism has indeed been a policy response by many of its trade partners to slow growth. While China is usually singled out for its policies, other countries have behaved more irresponsibly, most notably rich Germany, whose surpluses, the largest in history, were built primarily on an undervalued currency, after the creation of the euro, and on weak wage growth, after the 2003–05 labor reforms. Growing opposition to trade, particularly among Americans most vulnerable to unemployment and consumer debt, was probably inevitable, and for the reasons listed in the Guardian article referred to above. But if an American retreat really is about to take place, rather than reorganize under Beijing’s leadership and around the surpluses China requires, it is far more likely that the world’s economies would be forced into domestic adjustments of various levels of difficulty, and respond with a mélange of industrial and trade policies aimed at easing the adjustment. To the extent that these policies force adjustment costs abroad, other economies will be forced to respond, and over time global trade will become unstable and increasingly contentious—and especially difficult for today’s surplus countries—in a way that is in fact closer to the historical norm than the anomalous stability of the four decades before 1914 and the six decades after 1945. A U.S. retreat from trade, in other words, will be damaging to global prospects. Many economists argue that it will also necessarily damage U.S. prospects, but they are almost certainly wrong. While there is no doubt that clumsily designed and implemented policy interventions can be disruptive for the U.S. economy, there is historical evidence that intervention can easily benefit diversified economies with large, persistent trade deficits, especially when these deficits are driven at least partly by distortions abroad. The case that most resembles that of the United States today is probably Britain in the 1920s, when its trade account was adversely affected by large foreign purchases of sterling for reserve and investment purposes. The British economy significantly underperformed that of both the United States and its continental rivals, with nearly a decade of unemployment in excess of 1 million insured workers. Link to comment Share on other sites More sharing options...
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