Yesterday I went through the market falls, as China retaliated to the Trump tariffs, even as President Donald Trump ploughed ahead with plans to impose steep new tariffs on imports despite warnings that the policy could trigger economic chaos.
Yet only 13 hours after the duties had gone into effect, in a social media post, Trump said that a set of tariffs on imports from many of America’s largest trading partners were paused. He indicated that turmoil in the financial markets following the implementation of the tariffs played a role in his decision.
In particular Bond yields had climbed, with speculation this might be a signal China was selling some of their massive holding, or perhaps it was hedge funds needing to raise cash to meet margin calls in a falling market, or maybe it related to elevated inflation fears. But it does appear the ructions on the Bond Markets cash a shadow on the tariff show.
Just remember this is a 90-day pause, and 10% tariffs are still in play, with some suggesting that these will remain a baseline for any negotiations, while others are seeking zero tariffs. This has a long way to go, and markets will likely remain jittery, so expect more icebergs ahead.
Digital Finance Analytics (DFA) Blog
RMS Trump Sails On, Having Avoided An Iceberg, For Now…
President Donald Trump’s so-called reciprocal tariffs are now in place, creating self-inflicted choppy waters, as RMS Trump sails on through a flog of confusion, dealing a thunderous blow to the world economy as he pushes forward efforts to drastically reorder global trade.
Trump argues that the taxes will boost US prosperity and revive domestic manufacturing, but his approach has drawn criticism from Wall Street, economists and some in Trump’s own party, who have questioned the administration’s methodology and warned of an economic fallout that could include higher consumer prices and slower growth, if not a recession. He has long argued for tariffs as a solution for his trade grievances, this plan will reassert US power, revive domestic manufacturing and extract geopolitical concessions.
He signed an executive order raising reciprocal tariffs on China to 84%, up from the 34% announced on April 2. With 20% in existing duties already in place, the total tariffs on Chinese goods now amount to 104%, along with import taxes on roughly 60 trading partners that run trade surpluses with the US. That comes after a 10% baseline tariff for most US trading partners took effect Saturday.
Asian countries are bearing the brunt of the measures, with Cambodia and Vietnam facing 49% and 46% charges, respectively. Imports from the European Union will be taxed at a 20% rate.
All of this, the president and his administration have repeatedly promised, will lead to a future boom, both economically for the US and politically for his party.
“We’re going to win the midterm elections, and we’re going to have a tremendous, thundering landslide,” Trump told Republican lawmakers and donors Tuesday. “I really believe that.”
The truth is, the economic sea has gotten very stormy, and there are indeed icebergs out there, but the as to who will get through safely, and who will go down with the ship is too hard to call.
Gold remains a relative safe haven, sitting just over 3,060 USD per oz, but commodities are down with WTI Oil at 58.19, and Brent at 61.44. and Bitcoin was last at 77,764.
As I discussed last week, much of the pain will be born in the US, as globalisation, which benefitted some but not all unravels. Beyond that new trade patterns will emerge, but meantime markets will remain tossed about by the currents and tides so batten down the hatches.
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Digital Finance Analytics (DFA) Blog
Will Trump's Titanic Tariff Plan Hit An Iceberg, And Who Goes Down With The Ship?
This is an edited version of a live discussion as I explore the latest from our modelling deep dive the latest households mortgage and rental stress analysis.
See my earlier show where I discussed the disconnect between reality and the current political election discourse. With just under half of households caught in a cash flow trap, we need some serious policy… https://youtu.be/jZoeH_KJrhc
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Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: Post Code Analysis: Where Households Are Hurting
This week we consider the impact of the Trump Tariffs on Property in Australia, look at the latest numbers and where property demand is coming from, and also consider some of the risks embedded in your homes.
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In this show we explore the latest on rental and mortgage stress, from data drawn from various sources, including our own surveys to highlight the mismatch between the massive problem many people are facing into, versus the glib political narrative on show through the election so far.
This also sets us up for our Tuesday live show were we will do a deep dive into the post code analysis. Link for that show here: https://youtube.com/live/cq3x1XAEVwc
If there is a specific post code you would like me to cover in that show, drop it in the comments below.
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Digital Finance Analytics (DFA) Blog
Many Households Are Feeling The Pressure (And The Election Is Missing The Point..)
This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way.
The 2nd of April “T” day will go down in infamy, as global markets have since lost around $6 trillion of value as the global world trade order was trashed. The U.S. now accounts for 70% of the global equity market, up from 40% during the Global Financial Crisis. CNN’s Fear and Greed Index fell to 4 out of 100, falling deeper into ‘extreme fear’ territory.
US Treasury Secretary Scott Bessent, the former hedge fund manager who the market hoped would be the voice of reason in President Donald Trump’s second administration, did an interview with Tucker Carlson on Friday night amid more carnage on Wall Street. And remarkably, he claimed it had nothing to do with the tariff war launched by his boss.
Things got so wild that Warren Buffett’s team had to make a public statement after Trump shared a video on social media that suggested Buffett endorsed Trump’s apparent plan to send the share market down 20 per cent on purpose to ultimately revitalise the US economy.
While the 10% level of tariffs are now in place, and the higher levels, calculated on the back of an envelope it seems, following, it is not clear whether they are here to stay, a negotiating point of departure, or an attempt to drive yields lower, thus easing the US deficit.
Jerome Powell on Friday said the FED expects US grow to fall, and inflation to rise which sounds like stagflation to me while acknowledge the tariffs were larger than expected.
China responded with a matching 34% on many US good, Canada imposed 25% tariffs on cars to the US, while other countries are circling the wagons trying to maintain the existing world order, even as the new world order is emerging. This is not going to abate anytime time soon, and there are consequences for households, especially US households actually, businesses and countries. “We’re in the Wild West of a trade war right now,” said Mariam Adams, managing director at UBS Wealth Management.
Trump likened the process to a surgical operation on a patient, stating, “It was an operation like when a patient gets operated on, and it’s a big thing. I said this would exactly be the way it is.” He further predicted that the markets, stocks, and the country will experience a boom.
What is clear so far is that US big firms who have invested in global supply chains, to source cheaply and mark-up massively to sell branded good like Nike and Apple, are right in the front line. Future cash-flows are at risk, so stock valuations are down, with Apple down 25% year to date and Nvidia down 29%.
This market insecurity is set to continue, as the tariff game is played, this is a world class science experiment, driven by Trump and his team, with significant and long lasting collateral damage well beyond the US. As I discussed in my recent post, the basis of the calculations are largely political, and the potential implications enormous. Many will need to reevaluate the potential future earnings from stock, and so value, stocks which generally were priced to perfection, and which are still some way from fundamental value. So, volatility and more falls need to be expected. Duck and cover as stagflation enters centre stage!
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Digital Finance Analytics (DFA) Blog
Trumps Tariff Tidal Wave Swamps Markets With Stagflation Incoming…
Markets have continued to react negatively with the ASX 200 down another 2.38% on Friday, taking year to date falls to 6.02%. The local volatility index was also elevated.
It was a similar story across Asia, apart from in China and Hong Kong which were closed for a holiday, with the Japanese Nikkei down 2.8% and down 9% across the week, and down 15% year to date; while the KOSPI was down 0.86% (perhaps impacted also by the news on the presidential impeachment, and overnight).
In the US, the S&P 500 was down 4.84%, the Dow down 3.98% and the NASDAQ down 5.97%. It will interesting to see if that trend continues on Friday and I will make my normal weekly review show tomorrow. The VIX remains elevated and the Dollar index fell again.
Meantime, Trump seemed to suggest the tariffs were open to negotiation in his latest grab, though other officials seem less open to changing them.
And we also go more clarity, (if that is the right word) on just how much fudge there is in the calculations they used to come up with figures, which as I said yesterday, were suspect. Originally commenters assumed more science behind them, including things like exchange rates and GST or VAT rates, but now according to the BBC, if you unpick the formula it boils down to simple maths: take the trade deficit for the US in goods with a particular country, divide that by the total goods imports from that country and then divide that number by two.
So plenty of fudge in these numbers to justify a political stance. And as Albo said yesterday, not the action of a friend. And the fudge continues, if you have been following the Australian election campaigns, as both sides try to react, without reacting.
Which takes us nicely to a show recorded yesterday with Adam Stokes, on his channel, where we discussed the tariffs, the end of globalisation, and also the local political scene. So I am going to play that now, and I will be back with my normal weekend show tomorrow, where I will look at the damage across the markets in more detail.
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Digital Finance Analytics (DFA) Blog
Plenty Of Fudge Around Tariffs, Markets And The Election Campaign!
Markets have continued to react negatively with the ASX 200 down another 2.38% on Friday, taking year to date falls to 6.02%. The local volatility index was also elevated.
It was a similar story across Asia, apart from in China and Hong Kong which were closed for a holiday, with the Japanese Nikkei down 2.8% and down 9% across the week, and down 15% year to date; while the KOSPI was down 0.86% (perhaps impacted also by the news on the presidential impeachment, and overnight).
In the US, the S&P 500 was down 4.84%, the Dow down 3.98% and the NASDAQ down 5.97%. It will interesting to see if that trend continues on Friday and I will make my normal weekly review show tomorrow. The VIX remains elevated and the Dollar index fell again.
Meantime, Trump seemed to suggest the tariffs were open to negotiation in his latest grab, though other officials seem less open to changing them.
And we also go more clarity, (if that is the right word) on just how much fudge there is in the calculations they used to come up with figures, which as I said yesterday, were suspect. Originally commenters assumed more science behind them, including things like exchange rates and GST or VAT rates, but now according to the BBC, if you unpick the formula it boils down to simple maths: take the trade deficit for the US in goods with a particular country, divide that by the total goods imports from that country and then divide that number by two.
So plenty of fudge in these numbers to justify a political stance. And as Albo said yesterday, not the action of a friend. And the fudge continues, if you have been following the Australian election campaigns, as both sides try to react, without reacting.
Which takes us nicely to a show recorded yesterday with Adam Stokes, on his channel, where we discussed the tariffs, the end of globalisation, and also the local political scene. So I am going to play that now, and I will be back with my normal weekend show tomorrow, where I will look at the damage across the markets in more detail.
http://www.martinnorth.com/
Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
Go to the Walk The World Universe at https://walktheworld.com.au/
Yesterday, President Donald Trump announced broad “reciprocal” tariffs on imports from US trading partners across the world. The US will impose a minimum 10% tariff on all trading partners and slap even higher rates on about 60 countries that hold large trade surpluses with the US. For example, the reciprocal rate on imports from China will be 34%; from the European Union, 20%; and from Vietnam, 46%.
According to a White House fact sheet, the global 10% tariff will go into effect on April 5 and then will be replaced by the individualized higher tariffs on April 9.
Australia is at the lower end of the Tariffs at 10% and with America accounting for just 4 per cent of Australia’s goods exports, economists said the direct effect of Trump’s 10 per cent tariff on Australia would be modest. But they warned the broader risk to the Australian economy was significant, with Australia’s major trading partners including China, Japan and South Korea hit with new tariffs ranging from 24 per cent to 34 per cent.
The widespread selloff in global markets makes clear that investors don’t expect any winners from the latest — and by the far the largest — salvo in a growing trade war. But they also suggest the US itself might be one of the biggest victims of Trump’s protectionist policies.
But to an extent, there is an important grain of truth here. The trend of recent years, of open trade, products being manufactured in countries with a strategic advantage of low wages, cheap energy and low environmental standards did mean the hollowing out of jobs in local markets, as can be seen by the reduction in local manufacturing in Australia.
But the conclusion is clear: globalisation as we have come to know it is over. Trumps latest actions reconfirms this. But the question is what next then. Regionalisation? Fragmentation? Worse?
UPDATE: The algorithm they used to calculate the “tariff rate” was even less sophisticated, it boils down to simple maths: take the trade deficit for the US in goods with a particular country, divide that by the total goods imports from that country and then divide that number by two.
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This is an edited version of a live discussion with Head of Investments at Walk The World Funds and Nucleus Wealth, Damien Klassen. In a time of tariffs and with markets in turmoil, how do we protect and survive?
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Digital Finance Analytics (DFA) Blog
DFA Live Q&A Replay: Investing In A Time Of Tariffs: With Damien Klassen…
