Has Trump pulled off a masterstroke with his tariff plan and trade threats?
Let me set my stall out. As someone from the UK, standing outside and looking in, I’m split over Trump. Some of the things he says and does are messed up. His constant ranting about fake news and answering every ounce of press criticism seems pointless and unproductive to me. On the other side, he talks a good game, and isn’t that what you want from a leader, at the very least, that they’re ready to go into battle for you and your country? I wish we had leaders with that sort of attitude over here and then Brexit might not be such the shit show it currently is.
That’s my simplified view of Trump but I’m watching all this tariff and trade news with a possible new-found respect for him. All I’ve heard from the press, from market participants and businesses is a finite dissection of how bad this is all going to be, how bad tariffs and a possible trade war will be. Everything has been taken apart to the nth degree in terms of ramifications to tariffs and trade wars. Other countries are getting their knickers in a twist over how to respond, and I think this is the masterstroke that Trump has pulled.
If there’s one thing that’s stood out from all the threats and actions from Trump, it’s that this is going to bring people to the negotiating table. European countries are running around like headless chickens not knowing what to do, while Mexico and Canada got themselves into a flap over NAFTA. Yet, when they’ve been ready to sit down with Trump, the result has been much more amicable and sensible than the original headline and chest beating threats proffered by Trump. Even Abe has now made tariffs and trade top of his chat list when he goes to the US and meets Trump. So, is that Trump genius at play here? He’s beaten the drum and now left the door open for any country that wants to prove its “friendship” to the US. He’s put the ball in everyone else’s court top say come and re-negotiate. If that’s his true intention, then it is a masterstroke and he deserves a huge amount of credit for that.
If there’s one thing we learnt from the tax cut plan, it’s that he’s prepared to start high and negotiate down to a level he probably would have been happy with from the start. I see exactly the same happening here, and good luck to him. That’s how a leader of a country should behave. A leader should grab other countries by the short and curlies when he/she feels that they’re being taken advantage of, and the US by virtue of its size, is a country you can’t turn your back on and ignore. Do you think anyone would give a monkey’s if some small country turned around and slapped tariffs on some of its trade? It wouldn’t make the second page in most newspapers.
Before you accuse me of joining the Trump smoke and arse blowers club, I know the proof of the pudding will be how it all develops but, just take a moment to think about the reaction so far from the other countries that might be affected. A trade war will only happen if they respond in kind. It’s in their hands whether there’s a trade war, not Trump’s, he’s just put the shot across the bow.
Trump hasn’t said he wants a trade war, he just wants some things to change, and so far, he’s got Mexico, Canada and Japan at/or coming to the table, and therein lies the genius. Look at NAFTA several months ago. It looked dead in the water but for all the threats, they’re all at the table negotiating. Even the tariffs have gone from blanket to excluding Mexico and Canada.
Love him or loathe him, I think he needs to be given some credit for having the balls to push on with the way he wants to do things. He’s not going to please everyone, and there’s always going to be winners and losers domestically but as I said earlier, taking the best interests of his country to heart should be the minimum that any leader (or potential leader), and any voting citizen should want before they’ve even set foot in office.
Like everyone else, I’m going to watch this situation develop and see how it pans out. If it all goes horribly wonky, then we’ll know he’s no genius but on what’s already happened I’m leaning towards the fact that he just might be.
Finally, how does this all fit into a trading perspective?
At the moment we’re rolling with the punches and headlines day to day. If the US gives Canada a good headline, the CAD gains, and vice versa. That’s how we have to trade it now, and with all the doom mongering analysis that this will hit the US and every other economy negatively. That’s the picture for short-term trading. For the longer-term it’s obviously very USD positive if Trump pulls off what he wants to achieve, which is a fairer deal for the US. If he does, that would be his tax plan and better trade conditions for the US, two huge positives. The dollar isn’t acting like it sees a vastly improving US economy but that’s because there’s always two sides to a pair but if he does nail this, it could mean a return to a strong USD trend that will creep up on us and become something that will roll for a long time. This is not something I’d jump into a long USD trade now for but once other countries and central banks like the ECB and BOJ get their monetary policy back to normal levels, and caught up to the Fed, the monetary policy playing field will be level, free from huge central bank interference and we’ll be purely trading who has the best economy. Given the head start the US has over everyone else, the dollar is prime to beat all the others. As many of you will know, I like sniffing out those long-term trades and trends and I’m getting a good feeling for this one. It might take a year before it all falls into place but I’m in no rush and I see plenty of time for things to develop.
Until then, long live Trump 😉
Philosophy: “Don’t be a Dick for a tick”
Read how Ryan got into trading here
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Great write up as usual Ryan, the art of a deal maker is to start much higher than the minimum acceptable indeed. And he’s been a deal maker all along. Nobody knows how it will pan out, he could worst case totally isolate the US from its foreign influences risking a more pronounced divesting out of the USD and losing more of its reserve status to the raising powers who are already manoeuvering East side. But you certainly have a good case if the Jenius succeeds in his plan.
In the process we’ll have to look through the trees(algo’s, models, sheep behaviours) to not lose sight of the forest behind. Volatility inside a range à la Brexit and EURGBP springs to mind until one side gives.
Hilarious vid to start the weekend !
Cheers K.
Yes, there’s a lot of water to go under this bridge before we get to a full on trade. Until then we stick to trading what’s in front of us.
I love that youtube channel. Check out their American football vids too.
Hearty congratulations on joining those of us who have always seen the genius under the wildly coiffed facade of bluster that characterizes this new kind of leader — this Reality POTUS — that the New (old) Left derides to the exclusion of all else that is relevant, and, in fact, that which is happening, quite positively, right in front of their Lyin’ Eyes. This is the New Progress (as opposed to Progressive) and will be ultimately responsible for, ahem … I have to say it … World Peace …..?
I’ve been all over social media (LinkedIn as opposed to Facebook — Twitter over Snapchat et al) touting what I call Peace Through Commerce (or Commercial World Calm) which is an offshoot of the old saw, Peace Through Strength. Ryan, you touch upon exactly that in your defense of what the naysayers believe is the indefensible side of this seemingly crude leader — his bluster, bravado, braggadocio, taunting and teasing — or what is commonly called, nowadays, Social-Media-Speak.
This loud, shouted exclamatory prose is precisely what is known nowadays as Modern Communication in a world devoid of basic privacies — and provides the only elemental filtering of social niceties within the public conversation that our lightspeed digital communication yields — and which is indulged in daily around the world every second of every hour in every day.
I bow to your comprehension of this new kind of leader, heretofore unknown in the hierarchy of modern governance and readily admit your points are all spot on. We likely would never have agreed on these facts just a month ago. The changes these policies are bringing about are happening in hyper-drive time, and to great effect.
As to the trading side of things — you are absolutely correct. Provided no one actually detonates The Big One before Trump’s many initiatives take flight, the USD is going to ultimately be the strongest beneficiary of these policies. US interest rates are heading higher naturally, without the (unwanted by many of us) intervention of our Fed — and as is the monkey-see-monkey-do attitude of the Big Sovereigns (Central Bank policies), Europe and most of Asia plus Big North and South America will all be coming off their ZIRP boat anchors. We’re already beginning to see and hear their reluctant and begrudging riding on the bandwagon, as policy-makers tip their hands with their typically lousy poker-faces with which they reveal via public-policy hints.
No need for central bank Interventions, verbal and otherwise as yet — and the same goes for the decade-ago-popular Carry Trades — but mark my words as a veteran of the old currency wars: the times they are ‘a’ changin” kids. Good days and great trades are on the horizon, and I, for one, can’t wait.
Hearty congratulations on joining those of us who have always seen the genius under the wildly coiffed facade of bluster that characterizes this new kind of leader — this Reality POTUS — that the New (old) Left derides to the exclusion of all else that is relevant, and, in fact, that which is happening, quite positively, right in front of their Lyin’ Eyes. This is the New Progress (as opposed to Progressive) and will be ultimately responsible for, ahem … I have to say it … World Peace …..?
I’ve been all over social media (LinkedIn as opposed to Facebook — Tw itter over Snapchat et al) touting what I call Peace Through Commerce (or Commercial World Calm) which is an offshoot of the old saw, Peace Through Strength. Ryan, you touch upon exactly that in your defense of what the naysayers believe is the indefensible side of this seemingly crude leader — his bluster, bravado, braggadocio, taunting and teasing — or what is commonly called, nowadays, Social-Media-Speak.
This loud, shouted exclamatory prose is precisely what is known nowadays as Modern Communication in a world devoid of basic privacies — and provides the only elemental filtering of social niceties within the public conversation that our lightspeed digital communication yields — and which is indulged in daily around the world every second of every hour in every day.
I bow to your comprehension of this new kind of leader, heretofore unknown in the hierarchy of modern governance and readily admit your points are all spot on. You and I would never have agreed on these facts just a month ago. The changes these policies are bringing about are happening in hyper-drive, blink-of-an-eye time, and to great effect.
As to the TRADING side of things — you are absolutely correct. Provided no one actually detonates The Big One before Trump’s many initiatives take flight, the USD is going to ultimately be the strongest beneficiary of these policies. US interest rates are heading higher naturally, without the (unwanted by many of us) intervention of our Fed — and as is the monkey-see-monkey-do attitude of the Big Sovereigns (Central Bank policies), Europe and most of Asia plus Big North and South America will all be coming off their ZIRP boat anchors. We’re already beginning to see and hear their reluctant and begrudging riding on the bandwagon, as policy-makers such as Draghi, Kuroda, Carney, and Visco et al, tip their hands with the typically lousy poker-faces with which they reveal their public-policy hints.
No need for Central Bank Interventions, verbal and otherwise as yet — and the same goes for the decades ago popular Carry Trades — but mark my words as a veteran of the old currency wars: the times they are ‘a’ changin” kids. Good days and great trades are on the FX horizon, and I, for one, can’t wait.
Wow! Thank you Bill for an awesome response.
I won’t lie, there’s times he does and says things that are proper WTF moments but I guess that’s the rough with the smooth.
I’m usually pretty apathetic when it comes to politicians so I tend to tar them all with the same brush, so I may not be as generous the next time ? but then I try not to get involved in politics too much on site. I have 3 rules regarding politics on here. I’ll only post about it when it’s market moving, potentially market moving or I can take the piss out of someone.
Have a great weekend sir.
My thinking has been quite similar as this excellent article. You could see, that he came from business background. He obviously has a vision, strategy and negotiating skills to come to what he wants.
He’s still got a big task ahead of him but if he pulls it off he’s going to change a lot of minds in the US.
Have a great weekend Prutar.
Ryan, a very well thought out article. If POTUS pulls this off, I believe he may very well do just that, then he certainly will MAGA and as a consequence the USD will strengthen over time as you so well articulate.
This could turn out to be trade very much like your EURUSD long term trade you started in late 2016 around the .05 mark and went to 1.20 area.
Thanks Ryan
Thank you JB.
I like the man in many ways. I sympathise with him as well at times because he is a sidelined president (but aren`t they all?). In his frustration, or when he is frustrated, he throws a bunch of stuff up in the air and sees how it all lands. That must infuriate the likes of Paul Ryan and the stool pigeons in his administration. Great piece Ryan. An enjoyable read
Cheers Si.
Indeed, sometimes he’s all over the place but like all politicians, you have to pass the final judgement after time has passed.
One thing I read recently which puzzled me was that the US trade deficit to the World as a whole is in the region of $370bln, yet he has only asked China to reduce the deficit by $1bln. I find that more than a little puzzling. Perhaps he really IS just making a point. Giving a warning.
I think most of this is a disguised warning at China. Xi’s comments were telling last week when he was rambling on about NK and he dropped in the comment that he hoped that “China and the US can control differences and promote economic cooperation”.
I was thinking this morning that my foot is almost in the Trump genius camp. He is a great negotiator and his tweets can have me fooled for a while but now I see how they are just part of his plan(s).
He’s still mad as a bag of spiders but there’s something there.
I’m gonna disagree. The only thing that Trump has shown is how spineless most of the USA follower nations are – they truly are sheep. Trump is a farce – and if you look at his twits, the language he uses – the 360 degree turns he makes on every subject matter, sometimes within minutes – it’s mental. My biggest hope is that Trump causes the whole world to start ignoring USA.
If this world is becoming multi-polar – USA is the least stable pole of the 3, in terms of their leaders. The problem is, you also have to consider that if not Trump, Americans were just as ready to elect another war-hawk – Clinton. Add to that the massively divided US population on nearly every topic – I’m not surprised that they are opting to elect mentally unstable leaders.
China is playing a big game – EU is playing a game (which was obvious via the new sanctions on Russia) – Canada/Mexico are in a hostage situation, so I understand them the most – meanwhile, Trump thinks he’s winning – and so do you 😉
Eventually, I suspect I’ll be proven right – and the rest of the world will get tired of the US lead and start heading in another direction, but that too presents many dangers. Once you start putting lunatics in control of the world’s biggest army/nuclear arsenal – well…. the end of times will arrive that much sooner, if they start feeling like the world is ignoring them.
This is one of those discussions where we have to think with two heads, normal head and trading head.
My normal head finds it hard to disagree with you but my trading head says look at the evidence. He threatened tariffs etc and then when everyone came running to him seeking negotiation, he handed out exemptions like sweets. If he gets an agreement with China (which was/is his ultimate target all along) then we don’t have any trade wars and the US is potentially in a better position, and thus currency moves will reflect that and give us trades. Both heads of mine think that’s smart whether it’s by design or default.
I’m not sure if smart is the right word though – perhaps lucky? Anytime a man points a gun at a bunch of other armed men and tells them what to do – and they obey – that’s great. At some point though they might start firing back, and what seemed smart at first will prove to be the opposite.
Time will only tell on that front.