With the US dollar at 3-year lows, you have to wonder what the White House is thinking. The US is a net importer, so a lower DXY translates into higher inflation – already facing an increase from Trump’s tariffs.
Another interesting development is the House’s budget provision Section 899, which would tax certain foreign investors’ holdings in the US by up to 20%. Another would charge noncitizens a 3.5% surcharge for remittances. Sounds like a good way to disincentivize foreign investors and keep the dollar sinking.
Bill Blain says it well.
Donald Trump has misjudged both China and Europe – and set in motion a swift re-ordering of how the world works. It’s increasingly possible any new global trade ecosystem that emerges will have a much smaller space for the USA. That has potentially massive implications for global tech innovation, the mythos of American stock exceptionalism, and the future of the US tech mega-stocks.
A few weeks ago US Trade Secretary Scott Bessent proudly claimed success and a US/China trade reproachment – but there is still very little actual trade steaming across the Pacific. This isn’t just deliberate trade disengagement ordered by the Chinese authorities – but individual Chinese businesses making a call on the commercial realities of dealing with Trump’s America. They react to the impossibility of making informed business decisions, investments and long-term plans in the face of flip-floppery and volatile decision making in Washington.
In Europe much the same is true. The shock of losing American markets weighs heavy across European businesses – but the response is not panic about lost markets, but how to find new ones and new directions. Businesses might make all kinds of promises about new investment into the USA – but most have little intention of spending money in an economy they can no longer understand. They will smile, say the right things, and wait to see what follows Trump.
Futures are off modestly ahead of the open. You know the drill.
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