I have been writing about this since the election and it is worth saying again now.
Trump's economic campaign was about three things:
- Promoting the stock market
- Reducing trade deficits through tariffs
- Reducing fiscal deficits
These three goals are incompatible.
I have emphasized that Trump's way of trading is to believe that the stock market (and GDP growth) will be the real priority, at the expense of the other two. There will be wonderful noise around these other priorities but it's not going to spark some kind of trade war that will negatively affect stock markets, and it won't reduce the deficit in a way that weakens growth.
I have a high opinion of that, or at least as high as you can have with anything related to Trump.
A report today that he will only issue a 'memorandum to investigate' the US trade deficit is a big sign that the thinking is correct. There have been big moves in the FX markets on the headlines and that's the right move. Now there is going to be some kind of denial and the sound and fury will return because the threat of tariffs is far cheaper than hiring them.
But actions speak much louder than words and if trump really wanted to impose tariffs and negotiate later, today would be the day to do it.
The market confirms that and it is good for global growth that the global trade order is preserved, for now. It doesn't even seem to be going after China, let alone Canada, Mexico and Europe.
The euro is now up 121 pips as part of a broader USD move.
EURUSD 10 minutes
