The Abundance of Events

We have seen an abundance of events, such as drastic US budget cuts, stock and crypto market volatility, ongoing trade tariff exchanges, and rather pessimistic inflation data reports.

We have seen an abundance of events, such as drastic US budget cuts, stock and crypto market volatility, ongoing trade tariff exchanges, and rather pessimistic inflation data reports. Whether this is what most people expected over the long haul from the arrival of Donald Trump, especially seeing the optimism in the markets after the first few days of his victory – I don’t think so. But whether it can be unequivocally called a failure, or whether it’s a risky but inevitable cost on the road to something bigger – maybe. Let’s break down the key moments we’ve seen lately.

Donald Trump’s Policies

As usual, I’ll start with politics, because in many ways it sets priorities and conditions for the measures we further see in the economy and other areas. Donald Trump’s policies are what is known as America First, but what does that mean? You can read more about his speech in the Senate, where he lists and comments on all the initiatives of his presidency, criticizes the previous policies of the Democrats on those very points, and offers an alternative. But in brief, he puts American interests at the center and expands the set of tools with which these interests can be defended and developed in foreign policy. He also prioritizes business interests and the enabling environment for them, as well as households and the environment that makes goods and services affordable and efficient for them.

But moving from the basics to the details, we can see how the Trump administration is taking steps that all businesses may not like and many households may suffer. In particular, the trade wars and tariffs he is imposing have had some good results at first, for example when it helped secure U.S. interests regarding Colombia. However, with other players, especially Canada and Europe, we’ve seen some pretty serious resistance – and it doesn’t seem like such a tempting idea anymore.

For example, Ontario Premier Doug Ford spoke with CNN:

“Absolute chaos created by one person, Donald Trump.”

But he has announced a whole series of retaliatory measures that also involve critical infrastructure like the supply of electricity.

It goes beyond Mexico and Canada, European Commission President Ursula von der Leyen said:

“We deeply regret this measure. Tariffs are taxes. They are bad for business and even worse for consumers.”

Beyond condemnation and dissent, however, the European Union will raise tariffs on U.S. beef, poultry, bourbon and motorcycles, bourbon, peanut butter, and jeans.

For one thing, it challenges political relationships with allies, and you know, I’ll add a bit of my personal opinion here. The US-Canada relationship has been built over decades, and Trudeau’s phenomenal speech does make sense. The U.S. and Canada have been on the same side in a number of challenges, helped out when there were problems, and so on, and is it fine that just one person cancel it? Even taking into account the unfairness in trade terms that Trump is talking about – in all these decades, doesn’t Canada deserve more thoughtful measures to correct that? I’ll leave that question open.

However, objectively speaking, it makes you wonder, somewhat for Donald Trump, the ends justify the means and in his interview in which he was asked if America expects a recession he indicated:

“I hate to predict things like that. There is a period of transition because what we’re doing is very big, we’re bringing wealth back to America, that’s a big thing. There are always periods of … it takes a little time, it takes a little time, but I think it should be great for us, I mean I think it should be great.”

Economic Factors

All of this has a direct impact on the economy, and here, too, things are very mixed. On the other hand, we saw that the shares of many American companies, especially infrastructure, experienced growth after the announcement, for example, that Donald Trump is resuming the development of oil, gas, and metals in the United States.

On the other hand, trade wars and sudden movements add uncertainty, and markets don’t like that. We have already seen several moments when the market was red after every news about tariffs imposed by Donald Trump.

But that is what it is and it’s similar to what Trump calls a transition, implying certain economic risks and costs. And he will probably continue down this path for several very important reasons.

One is the U.S. national debt, the servicing of which could be $1.5T by the end of the year. Investors are showing less and less interest in U.S. debt because they fear the government will not be able to pay it back, so they are buying fewer government bonds. For example, the 10-year Japanese government bond yield has crossed above 1.50% for the 1st time since the Financial Crisis and this may cause Japanese markets and investors to begin bringing money home.

The other is that the fight against inflation is still