Trump Era 2025-2029 : Stock and Economic Comment

[divs4ever]

Via their machinations, don't they always regardless of all else?

only a small number seem to always land on the luxury lounge , several more usually land on their feet

 

[JohnDe]

Just my

Trump, without firing a shot, certainly knows how to declare war (on everyone) and I'm sure he's quite chuffed that his pen, is mightier than any sword.

I'd also hazzard a guess that under the tariff guise, there are many motives and moves to get the US of A out of the debt hole it is in. I've seen/heard it said that probably the main play is to get the Fed. to lower interest rates, thus allowing refinancing the trillions the good ol' US of A needs to repay. Isn't that straight out of Trump's property playbook?

Unfortunately for the rest of us, this tariff war doesn't appear to be a short term strategy. Getting US of A offshored businesess/manufacturing back onshore cannot and won't happen overnight. Am thinking that if I'm a wake up to this, so are the rest of us especially the markets.

I've also a suspicion that this tariff war just might give China the economic advantage much to the deteriment to the US of A.
Hence the renewed call to reclassify China as a developed country.

So much is in play that my only conclusion is, major upheavals and re-adjustments required all round.

I guess the one big plus for traders is the volatility. As Trump posted, "It's a great time to get rich!"

Behind the Trump tariffs and the country-to-country discussions are serious global economic and defence issues which are rarely discussed.​

​

The best economic explanation I can find for the Trump strategies is contained in a recent 41-page essay by Hudson Bay Financial senior strategist Stephen Miran.​

​

Miran explains America’s status as reserve currency carries the burden of an overvalued currency, which erodes the competitiveness of its export sector. America wants to retain its status as the world reserve currency, but is unwilling to bear the pain created by the hollowing out of its industrial base created by reserve currency structures.​

Because America provides reserve assets to the world, there is massive global demand for US dollars and treasury securities, which is not rooted in balancing trade or in optimising risk-adjusted returns. These trillions of dollars of capital inflow artificially boost the US dollar.​

Then, the US spends the money on low-priced imported goods, which decimates American manufacturing and surrounding service industries. This creates great hardship in selected geographic areas, but buoyancy in the financial sector.​

American exports are curbed not only by the high dollar, but because many countries have tariffs and other protection systems. The combination means the rest of the world grows at the expense of the US, which has massive current account deficits.​

Accordingly, the US’s share of global GDP halved from 40 per cent of global GDP in the 1960s to 21 per cent in 2012, and has recovered slightly to its present level of 26 per cent.​

Eventually, there is a “tipping point” where the deficits and economic shrinking become large enough to induce credit risk in the reserve asset. The reserve country may then lose reserve status, ushering in a wave of global instability.​

It may not be popular, but here is the economic reason for Trump’s tariff play

When US trading opened on the third day of the Donald Trump tariff-induced share market slump, there was a further sell down.

Although there was a later recovery, many US and global institutions clearly believe Americans have elected a madman as President and the world is headed into a deep global recession.

Today I deliver controversial but underlying good news, there is an economic justification for what Trump is doing, and he is not mad.

Indeed, there has been a drastic decline in the size of the US economy compared to the rest of the world and unless the decline is arrested the US will eventually lose its reserve currency status and its defence capacity will be dramatically reduced. This looming long term crisis is behind the Trump actions and the “Make America Great Again” slogan.

This does not mean he is right and he will achieve his aims. Clearly there is high risk and there will be repercussions, but describing his economic strategies actions as crazy seriously misleads.

To help our readers understand what is happening, on Monday I set out how the Trump strategy has been structured, which has been confirmed by the rush of countries now looking to have talks with the US.

Those discussions will often cover the massive rise in Chinese automated industrial capacity, led by electric cars, which threatens manufacturing in Europe, Japan and Korea as well as the US.

Relations between China and the US are deteriorating, contributing to a further fall in the Australian dollar.

Behind the Trump tariffs and the country-to-country discussions are serious global economic and defence issues which are rarely discussed.

The best economic explanation I can find for the Trump strategies is contained in a recent 41-page essay by Hudson Bay Financial senior strategist Stephen Miran.

Previously, Miran served as senior adviser for economic policy at the US Department of the Treasury.

Miran explains America’s status as reserve currency carries the burden of an overvalued currency, which erodes the competitiveness of its export sector. America wants to retain its status as the world reserve currency, but is unwilling to bear the pain created by the hollowing out of its industrial base created by reserve currency structures.

Because America provides reserve assets to the world, there is massive global demand for US dollars and treasury securities, which is not rooted in balancing trade or in optimising risk-adjusted returns. These trillions of dollars of capital inflow artificially boost the US dollar.

Then, the US spends the money on low-priced imported goods, which decimates American manufacturing and surrounding service industries. This creates great hardship in selected geographic areas, but buoyancy in the financial sector.

American exports are curbed not only by the high dollar, but because many countries have tariffs and other protection systems. The combination means the rest of the world grows at the expense of the US, which has massive current account deficits.

Accordingly, the US’s share of global GDP halved from 40 per cent of global GDP in the 1960s to 21 per cent in 2012, and has recovered slightly to its present level of 26 per cent.

Eventually, there is a “tipping point” where the deficits and economic shrinking become large enough to induce credit risk in the reserve asset. The reserve country may then lose reserve status, ushering in a wave of global instability.

The US is nowhere near this point, but unless action is taken it will become an issue, adding to the current community pain in selected areas.

Of course, having the US dollar as the world currency gives the US great financial power to sanction countries — as Russia discovered.

China and other countries are looking to provide a reserve currency (and gain the power) but at this stage they don’t have the structural stability of the US.

In his first term as President, starting in 2017, Trump undertook a small attempt at reducing the US community pain arising from currency reserve status with a lift in tariffs. He discovered it did not lift inflation.

In the 2018-2019 Trump tariff experience, the effective tariff rate on Chinese imports increased by 17.9 percentage points. But, the Chinese renminbi depreciated against the dollar over this period by 13.7 per cent, so the after-tariff US dollar import price rose by only 4.1 per cent.

In other words, the currency move offset more than three quarters of the tariff, explaining the negligible upward pressure on inflation. That experience inspired Trump’s current belief 10 per cent tariff rises will be absorbed by currency variations while reducing the pain of being the reserve currency.

However, later the protection provided by the first Trump tariffs was decimated because many Chinese companies began exporting goods or components to third countries, (including Mexico and Canada), engaging in some minor processing and then re-exporting to the US.


Chinese President Xi Jinping speaks during a meeting in Beijing. Picture: Ken Ishii/Getty Images

The majority of Chinese manufactured goods escaped the US tariff this way, which explains many of the current Trump penalty tariffs, including those placed on Mexico and Canada.

These issues will be discussed country by country, but there is another aspect to the economic scenarios outside normal trade.

America provides a global defence shield to liberal democracies, and in exchange, America receives both the benefits and burdens of reserve status.

President Trump believes European and other countries are taking advantage of America in both defence and trade measures, creating a strain on the American export sector and the socio-economic problems which follow.

As the economic burdens on America grow with global GDP outpacing American GDP, America is finding it more difficult to underwrite global security, because its current account deficit grows and its capability to produce equipment is hollowing out.

The US wants its defence burden reduced by increased expenditure from those benefiting from the American security umbrella. This includes Australia.

Miran concludes as the reserve currency/defence bargain becomes less appealing it “brings us to the present, whereby there is growing consensus in America to change the relationship”.

 

[mullokintyre]

China will have SOME of their strategy totally planned and thought out , MAYBE even tried and tested with all those 'selected shutdowns ' during the virus saga .

now China might have taken some lessons on the EU sanctions on Russia ( let them hurt themselves )

but China DOES have some leverage , the US can be self-sufficent but not by the end of the month .. will they have time to be self-reliant before things get NASTY

the peasantry always get hurt , war , recession , inflation, trade wars , etc etc etc

but in previous times the peasantry were tougher ( and maybe more resourceful , like say the Prohibition era )

China is a nation of producers, if they cannot sell their product they are buggered.
if all those factories don’t keep going the peasants will revolt.
The US is a nation of consumers, and is by far their biggest market.
They have been trying to get around tariffs by shipping stuff to intermediate countries and then on shipping and pretending they were made in the intermediates.
They cannot get away with that much longer.
the US will suffer, but not necessarily as much as the Chinese.
Both countries have enormous structural and in Chinas case, enormous demographic issues, the US less so.
I don’t know how all this will play out, but there are so many complexities and variables, if anyone gets the eventual outcome correct it will be a fluke, ot because of analytical skills.
Mick

 

[divs4ever]

China is a nation of producers, if they cannot sell their product they are buggered.

they can/will still sell just maybe not to the US or EU

i know both are unbelievably ego-centric but more than half the world is neither USA or EU

if China makes better and more value-added goods they will be fine , they have a way out without excessive pain ( and after all the previous purges in China , they know what REAL pain is )

https://yewtu.be/watch?v=3hoFsIt0hA8

 

[farmerge]

China will have SOME of their strategy totally planned and thought out , MAYBE even tried and tested with all those 'selected shutdowns ' during the virus saga .

now China might have taken some lessons on the EU sanctions on Russia ( let them hurt themselves )

but China DOES have some leverage , the US can be self-sufficent but not by the end of the month .. will they have time to be self-reliant before things get NASTY

the peasantry always get hurt , war , recession , inflation, trade wars , etc etc etc

but in previous times the peasantry were tougher ( and maybe more resourceful , like say the Prohibition era )

@divs4ever If the fading memory is correct didn't a lot of the booze during Prohibition come in from Canada on a paved road paid for by the US via the POTUS of the day????

 

[Garpal Gumnut]

China is a nation of producers, if they cannot sell their product they are buggered.
if all those factories don’t keep going the peasants will revolt.
The US is a nation of consumers, and is by far their biggest market.
They have been trying to get around tariffs by shipping stuff to intermediate countries and then on shipping and pretending they were made in the intermediates.
They cannot get away with that much longer.
the US will suffer, but not necessarily as much as the Chinese.
Both countries have enormous structural and in Chinas case, enormous demographic issues, the US less so.
I don’t know how all this will play out, but there are so many complexities and variables, if anyone gets the eventual outcome correct it will be a fluke, ot because of analytical skills.
Mick

It applies to Australia as well. We tie ourselves too closely to foreign countries. Britain did us over during WW2 by abandoning us at the fall of Singapore and again when they joined the EU and overnight stopped buying our exports.

We are now tied in too closely with the US. Our Western towns are dying, even though we have riches in our mines there, because of fly in fly out FIFO workers. The only people who benefit from FIFO are Airlines ultimately owned by foreigners, Boeing and foreigners like Alan Joyce. Mt. Isa and Cloncurry are heading the same way with FIFO. We need to do what we can to develop Australia via internal investment and infrastructure rather than relying on the Americans.

gg

 

[IFocus]

Not necessarily correlated.

Considering how hard the USD has run and how much oil has dumped, inflation's likely to actually come in quite low. I just don't see the tariffs increasing prices enough to offset the USD increase/oil decrease.

Powell even gave an interview the day of the first (or was it 2nd?) big announcement saying he doesn't actually expect the fed to have to move rates much.

It will be interesting to see where the numbers land inflation will be countered by currency and oil possible drop off in demand due to tariffs would be my worry just cannot see US incomes rising, will take time to see the trends.

 

[divs4ever]

@divs4ever If the fading memory is correct didn't a lot of the booze during Prohibition come in from Canada on a paved road paid for by the US via the POTUS of the day????

some from Canada ( whether made there or not ) but plenty was made in rural areas with heaps of woods/trees and hardly a driveable track , in fact moonshine might still be widely made ( in small quantities even today )

but the main thing about the Prohibition is it made 'illegal ' socially acceptable and widely tolerated

a far heavier version of marijuana use in the '70's and '80's

 

[over9k]

China is a nation of producers, if they cannot sell their product they are buggered.
if all those factories don’t keep going the peasants will revolt.
The US is a nation of consumers, and is by far their biggest market.
They have been trying to get around tariffs by shipping stuff to intermediate countries and then on shipping and pretending they were made in the intermediates.
They cannot get away with that much longer.
the US will suffer, but not necessarily as much as the Chinese.
Both countries have enormous structural and in Chinas case, enormous demographic issues, the US less so.
I don’t know how all this will play out, but there are so many complexities and variables, if anyone gets the eventual outcome correct it will be a fluke, ot because of analytical skills.
Mick

QFT

Young people do most of the consuming of "stuff" so if you make "stuff" then you need a young country to sell to - either internally or if you don't have it internally you sell to younger people overseas, but that assumes that the younger people overseas aren't buying their own self-produced "stuff".

Trump is simply taking a sledgehammer to that process, forcing the americans to buy from elsewhere/internally and the chinese to find another market to sell to.

 

[over9k]

Meanwhile, the AUD seems to have consolidated at its below 60 level with spy futures now at -2.7 rather than the -1.7 they were a couple hours after the U.S close.

Brent crude is down 4% and gold is up 1%

 

[farmerge]

QFT

Young people do most of the consuming of "stuff" so if you make "stuff" then you need a young country to sell to - either internally or if you don't have it internally you sell to younger people overseas, but that assumes that the younger people overseas aren't buying their own self-produced "stuff".

Trump is simply taking a sledgehammer to that process, forcing the americans to buy from elsewhere/internally and the chinese to find another market to sell to.

@over9k just musing here. If the tariffs on China and theirs on good 'ol US of A stay in place, will China then start off loading to another country that the mad POTUS sort of deals with, thus getting around the corner and back into that market???

 

[dyna]

Yesterday's ABC Radio " Nightlife " features finance guy Roger Montgomery on Trump and various other economic stuff .
Podcast out now . 50 minutes .

 

[over9k]

@over9k just musing here. If the tariffs on China and theirs on good 'ol US of A stay in place, will China then start off loading to another country that the mad POTUS sort of deals with, thus getting around the corner and back into that market???

I can certainly see them trying it but I mean, where can they export to first that has both favourable (lower) tariff conditions and isn't going to just cost them the difference in fuel?

But ignoring that, contrary to popular belief, whilst the senior ranks of government (the public service) are all too often evil, they're generally not stupid. They're going to know as soon as anyone tries to sneak something past them, so to speak.

Were I in their position then if, say, australia tried what you're suggesting then I'd just reply with some variation of "We know what you're doing, you're going to stop it, and if you don't, we'll just hit you with higher tariffs until you do".

 

[sptrawler]

I can certainly see them trying it but I mean, where can they export to first that has both favourable (lower) tariff conditions and isn't going to just cost them the difference in fuel?

But ignoring that, contrary to popular belief, whilst the senior ranks of government (the public service) are all too often evil, they're generally not stupid. They're going to know as soon as anyone tries to sneak something past them, so to speak.

Were I in their position then if, say, australia tried what you're suggesting then I'd just reply with some variation of "We know what you're doing, you're going to stop it, and if you don't, we'll just hit you with higher tariffs until you do".

Absolutely, the U.S has put high tariffs on countries that are affiliated with China, to stop them channeling through them.

IMO this is about decoupling China's exponential growth and the U.S retaining the reserve currency status.

Also IMO our mineral exports are in for a hiding to nothing, our Govt will be crapping themselves IMO

 

[TimeISmoney]

China is a nation of producers, if they cannot sell their product they are buggered.
if all those factories don’t keep going the peasants will revolt.
The US is a nation of consumers, and is by far their biggest market.
They have been trying to get around tariffs by shipping stuff to intermediate countries and then on shipping and pretending they were made in the intermediates.
They cannot get away with that much longer.
the US will suffer, but not necessarily as much as the Chinese.
Both countries have enormous structural and in Chinas case, enormous demographic issues, the US less so.
I don’t know how all this will play out, but there are so many complexities and variables, if anyone gets the eventual outcome correct it will be a fluke, ot because of analytical skills.
Mick

Add up all the other countries and the US is barely be a blip.

 

[over9k]

Absolutely, the U.S has put high tariffs on countries that are affiliated with China, to stop then channeling through them.

Yeah that's the thing about this stuff - unlike a court of law where what you know and what you can prove beyond reasonable doubt, you don't have to prove a damn thing to just slap someone with a tariff or embargo or even a full on blockade if you want to start really turning the screws.

Reality is that an embargo is the next escalation but that I'm very doubtful about because as I keep trying to mention to everyone, the tariff revenue and the corresponding difference it'll make to various (not least of all, the U.S's) budget position is not insignificant. An embargo would only serve to cut off that revenue.

I still think this whole tariff business is just a tax increase to fix the government's fiscal position masquerading as everything else.

That's not to say that there isn't an issue with trade deficits and one sided tariffs and so on but I'm still very skeptical that all of that is the primary reason for them.

You know that infamous movie line "It's quiet... too quiet"?

Well, I think the media are being too quiet about it, if you catch my drift

 

[over9k]

I've got another one of my economics lesson posts to make in a bit but I'm tired as fcuk and need a shower so might not make it until the morning. Watch this space.

 

[DannyB0000]

https://www.cnbc.com/2025/04/09/china-to-raise-reciprocal-tariffs-on-us-goods-to-84percent.html

China has hit back. 84% tariffs against the US

 

[Dona Ferentes]

https://www.cnbc.com/2025/04/09/china-to-raise-reciprocal-tariffs-on-us-goods-to-84percent.html

China has hit back. 84% tariffs against the US

I'll see you and raise you ten

 

[over9k]

Inb4 another increase from the americans.