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The story of Trump’s administration so far is the weakness of the US dollar. Policy was chaotic, but when you speak with people on the market, they highlight three concerns:
- Below the direction for us to grow
- High inflation in the United States
- Low productivity/dynamism
These are the classic characteristics of a weak -performance economy, but it is also a 180 -degree turn of what the markets expect at the end of the American elections. Trump 1.0 talked about a lot about customs tariffs, but he eventually focused on growth and promoting stock prices. Now, it seems more like this was the product of his first cabinet instead of his basic instincts.
So what are the things that pay fears:
1) Definitions
This is a clear one but there is more and more conversations about the unintended consequences of these policies. In Covid, we learned that supply chains are much famous than thought, and there is concern that something can be broken and leads to an inflation shock that goes beyond what simple mathematics indicates.
2) Growth
There is Trump’s “growth agenda” about less taxes and the abolition of the restrictions that helped in his election, especially with the main conservatives, but has been overwhelmed so far. In addition, I am not sure of the really low contradictory fruit because the primary part of the tax reduction is just an extension of what is already present. But besides these things, the induction uncertainty and policy science is the great opposite wind of growth, especially if the Federal Reserve will have to keep interest rates higher.
The main fear is that there is management in place It is believed that the rules of the economy can be rewritten. We have seen protectionism fail several times before and this will not be different.
So far, we have not seen radical declines except in consumer and commercial morale, but the market maintains its breath to strike the real economy.
3) The deficit
There is some good news in Trump’s agenda, but there is also a problem how to pay for it. The United States operates a deficit at 7 % of GDP, comes in a time of 4 % of unemployment. The bond market swings at the present time and I think at least part of that was the indicators of last week from the Congression that it aims to pass a budget with all the good things that Trump promised his campaign. Financial falcons are not only present and the United States can be on the path of deficit by 10 % of GDP, which will lead to an inevitable account of growth at a later time or lead to political turmoil.
4) rules and rules
The US dollar is located in the center of the global order and is collected together by things such as NATO, the World Trade Organization, the World Health Organization, the United Nations and the strong faith in the rule of law in the United States. All of these things are eroded or destroyed at an anxious pace and in a way that will not be rebuilt easily. It is difficult to imagine what is at the test here, but some blowing from Beijing today just hinted at the United States: intellectual property. What do American companies deserve in a world that no longer respect them?
5) Migration
It is not clear how much Trump’s campaign of illegal immigration was a theater and how real was. Moreover, it is not clear how clear none of them, but illegal immigrants in the United States are a major component that maintains inflation in agriculture and hospitality. Last week, Trump put forward a plan in which some can leave and return legally, but – again – there is no clear plan here and wondering whether Trump does not continue playing with its worst instincts.
6) Federal Reserve Policy
This is the danger of the tail, but earlier this month, a Trump American judge allowed to proceed with the launch of two senior officials of the Federal Trade Committee. If it is allowed to stand, it paves the way for him to shoot at federal reserve officials, including Jerome Powell. It is a battle heading to the Supreme Court, but the effects of FX are clear. If the US Central Bank loses independence, it will be stacked by loyalists who maintain low prices, undermining the value of the dollar.
