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…
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.
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.
http://www.martinnorth.com/
Digital Finance Analytics (DFA) Blog
Will Trump's Titanic Tariff Plan Hit An Iceberg, And Who Goes Down With The Ship?
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.
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/
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Digital Finance Analytics (DFA) Blog
Plenty Of Fudge Around Tariffs, Markets And The Election Campaign!
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.
http://www.martinnorth.com/
Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
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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.
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/
Overnight we got the latest decision from the US Federal Open Market Committee keeping its benchmark federal funds rate steady for the second straight meeting, in a target range of 4.25%-4.5%.
But in the subsequent press conference, where Fed Chair Jerome Powell seemed to be tip-toeing through a potential minefield, he said the committee had down forecast growth, increased inflation expectations, and said the full impact of tariffs had yet to work though. And while the FOMC did slow the pace of balance-sheet runoff — their updated forecasts and dot plot betrayed little concern about the growth scare that has gripped markets. More rate cuts are expected, perhaps two though the year, despite the higher inflation and lower growth.
Significantly though he dusted off the old “transitory” moniker again, which you will recall was used through the early phase of the strong inflationary pulse we saw post COVID. It was then dispatched to the dustbin of stupid and unhelpful terms, that is until it was resurrected in the press conference. Seeing as they got it so wrong last time, was it wise to do that, as I am not sure it will help their credibility this time around.
Incidentally, because the Fed will also start shrinking its balance sheet at a slower pace starting in April, meaning it will reduce the amount of bond holdings it lets roll off every month that is a quasi rate cut, without being a rate cut. Again, this is engineering a watch and wait period, for the FED, and perhaps the possibility of the real rate cut will be clearer by the Northern Summer.
So this was a do not harm press conference, but I suspect despite wanting to calm the markets, and avoid tripping over Trump, the truth is the data-dependent FED is itself unsure of future trajectory. Which may not bode well for the rest of us!
http://www.martinnorth.com/
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Go to the Walk The World Universe at https://walktheworld.com.au/
The price of Bitcoin and other cryptocurrencies continue to whiplash in response to more news from the While House about the so call Strategic crypto reserve. Trump had vowed to create a strategic Bitcoin reserve on the campaign trail, one of many crypto-related promises that helped fuel a surge in prices up until the day of his inauguration. Trump’s campaign pledge to create a strategic Bitcoin reserve was one of many promises designed to appeal to an industry that has emerged as source of significant political donations.
On March 6th President Donald Trump has signed the long-awaited order creating a strategic Bitcoin reserve and an additional stockpile of other digital assets. The order, was shared initially as a post on X by White House crypto czar David Sacks, indicated that the government wouldn’t use taxpayer money to fund a strategic reserve of the largest digital asset.
“The Reserve will be capitalized with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings. This means it will not cost taxpayers a dime.”
The government holds about 200,000 Bitcoins seized over the past 15 years. That’s worth $17.5bn at today’s prices, with Trump’s order also calling for an audit of the government’s crypto holdings. The Department of Justice- which holds all the government’s seized Bitcoin- was seen selling the token intermittently on the open market in recent years.
This was a disappointment to many who had taken positions ahead of the announcement on the assumption that the Treasury would purchase additional crypto holdings. With this latest development, these positions are being unwound. While the creation of the Bitcoin-specific reserve fulfills a promise Trump made on the campaign trail, the details fell short of industry expectations.
To me this looks more like lipstick on a pig than a big strategic shift. But this was not what the pro-crypto community had been banking on.
Digital Finance Analytics (DFA) Blog
Less Digital River, More Lipstick On A Pig For Bitcoin Strategic Reserve!
The price of Bitcoin and other cryptocurrencies continue to whiplash in response to more news from the While House about the so call Strategic crypto reserve. Trump had vowed to create a strategic Bitcoin reserve on the campaign trail, one of many crypto-related promises that helped fuel a surge in prices up until the day of his inauguration. Trump’s campaign pledge to create a strategic Bitcoin reserve was one of many promises designed to appeal to an industry that has emerged as source of significant political donations.
On March 6th President Donald Trump has signed the long-awaited order creating a strategic Bitcoin reserve and an additional stockpile of other digital assets. The order, was shared initially as a post on X by White House crypto czar David Sacks, indicated that the government wouldn’t use taxpayer money to fund a strategic reserve of the largest digital asset.
“The Reserve will be capitalized with Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings. This means it will not cost taxpayers a dime.”
The government holds about 200,000 Bitcoins seized over the past 15 years. That’s worth $17.5bn at today’s prices, with Trump’s order also calling for an audit of the government’s crypto holdings. The Department of Justice- which holds all the government’s seized Bitcoin- was seen selling the token intermittently on the open market in recent years.
This was a disappointment to many who had taken positions ahead of the announcement on the assumption that the Treasury would purchase additional crypto holdings. With this latest development, these positions are being unwound. While the creation of the Bitcoin-specific reserve fulfills a promise Trump made on the campaign trail, the details fell short of industry expectations.
To me this looks more like lipstick on a pig than a big strategic shift. But this was not what the pro-crypto community had been banking on.
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/
