The punishment of the “madman”: Is Trump’s actions eroding the economic power of the United States?
This is some candid, non-academic language that describes unusual patterns in the American market brought to you by a currency-policy historian.
stock? down. Dollar? Same. Demand for U.S. bonds? Also sinking. This shouldn’t happen – not all at once.
But Barry Eichengreen saw a historic reaction, where there is indeed a common theme: collapse in the faith in the United States.
“Investors around the world concluded that there was a lunatic in the White House and the lunakics were given control of asylum,” said Eichengreen, a historian at the University of California, Berkeley.
“The damage is obviously unrepairable.”
Washington is trying to stick the fragments of a clumsy stupid month – when U.S. President Donald Trump put forward the highest tariffs in over a century, then walked a few, then dissatisfied with interest rates, threatened to fire the Fed’s head and then even white building employees before excluding rule Research alternative options.
The United States does impose a 245% tariff on Chinese goods, but it doesn’t have the way you think. Andrew Chang explains how this number has become so high and which imports are hit. So, is Trump’s tariff method calculated?
Recent History Political intervention has been shown In central banks and interest rates, there can be a Disaster effect About inflation.
It just shouldn’t happen in the United States of America (the largest economy in the world). The world’s most important currency holder, one of the most secure investments on the planet: U.S. debt bonds.
In recent weeks, investors fleeing stock markets have not done what they normally do: toward a safe embrace of the dollar and U.S. government debt.
Some analysts combine events with what you usually see in developing economies. Risk assets, safe assets and currencies all struggle at the same time.
“The United States is not just a country. It’s a brand. It’s a universal brand, both our culture, our financial strength, our military power.” Ken Griffin, a large Republican giant and Castle CEO, said Wednesday at the World Economic Summit in Washington.
“And we are eroding the brand right now. … We put the brand at risk,” he said.
U.S. Treasury Secretary Scott Bessent said in an event chaired by the International Finance Institute that the U.S. “continuous over-dependence on consumer demand” is creating an “increasingly balanced” global economy, citing China’s export growth economy is a “unsustainable” model.
“Removing the smash on the brand can take a long time. … Repairing the loss can be a lifetime.”
Here, there are differences in perspectives. Apparently, the Trump administration is trying to fix the loss.
All of the above indicators have been lightening some of the indicators over the past few days as the government softens its tone in its global trade war and the Federal Reserve.
The government is reportedly considering reduce Some huge Chinese tariffs exceed 140% of certain products, triggering Shocking collapse In recent days of shipping.
Trump told reporters on Wednesday that negotiating with China was “active.”
“Tariff negotiations are going well. We are dealing with many, many countries,” he said.
But on the same day his finance minister Tell reporters The United States and China have not actually spoken yet. Meanwhile, some countries say it is not clear what the United States actually wants.
Therefore, the tremor does not end overnight.
“This is not a short-term adjustment; it is the paradigm shift we expect, which will go far beyond the president’s four-year term,” said a research briefing this week by Oxford Economics, referring to the newer, greater era of protectionism.
“Indeed, history shows that even if trade protectionist measures like tariffs and non-tariff barriers are removed, it may take decades to completely back them back because they can get a strong lobby from protectionism and a niche from protectionism.”
Not only stocks fell – this year’s S&P 500 fell 8%, even if a rally took place this week.
The dollar fell into a staggering nine cents Oppose the euro Since Trump took office. Even reduced by two cents Canadian dollaragainst all expectations.
Shockingly, most disturbingly, the demand for U.S. debt seems trembling, with the US Treasury Department for a 10-year period Previous pennyalthough it softens a little.
There are different opinions on how bad this is actually.
Another expert, Steven Kamin, a researcher at the American Corporate Academy think tank, agreed with other diagnoses that release unusual trading patterns.
He said things got “so crazy” and that “investors were scared and from [U.S.] US dollars, too. ”
But he wasn’t sure how far he would go.
Kamin is not worried about stock market volatility. As for bonds, he is focusing on the broader economy to assess whether its current valuation is normal.
Then, at the heart of the global financial system is a fundamental problem: the status of the US dollar, the reserve currency of generations.
The widespread use of Green Guard has created endless appetite in international transactions and in foreign central bank holdings.
This unproven appetite makes America spend more than it does, bear monster debt, and maintain confidence in issuing bonds, and there will always be buyers.
Kamin, a former director of the Fed’s international financial division, is not worried about the end of this position.
“Obviously, the dollar dominated,” he said.
“Some people say that the current episode will lead to death in a special character. It’s unlikely. … the world can’t be opened once.”
The dollar is still the king.
It still accounts for 57% of the currency held by foreign central banks. Its share is Retreat a little For decades, again In recent yearsbut there are no obvious alternative trading and bond investment candidates.
In Washington, about whether the US should really welcome a dollar, which will help produce goods at cheaper prices at more competitive prices.
But this is a few views. The general consensus in Washington is that the U.S. gains more than one dollar of losses.
“We continue to develop strong policies,” Treasury Secretary Scott Bessent said Wednesday.
“I think the United States will always be a reserve currency for life. I’m not sure if anyone else wants it. … It’s a lot of pressure for export economies.”
Eichengreen may not like the Trump administration’s handling of the economy. But he agrees here with Trump’s Treasury Secretary: A strong dollar will help the United States, not just the United States
He said these benefits include lower debt costs for the government, the convenience value of the Bank of America and the company that trades in its own currency, insurance in the crisis, which is a rare asset, and the power to impose sanctions that can resist using your bank.
He fears American politicians will mess up all this. Asked if the United States is in real danger of losing its reserve status, he said: “We are.”
“When the ability and even rationality of a country’s policymakers are suspected, its currency loses its safe haven and retains its monetary status,” he said.
“We can expect this process to accelerate.”
