Trump has been blasting away on Truth Social.
First off, Trudeau flew down to Mar-a-Lago to meet with him and they’re smiling in the picture. The tweet (or whatever you call it) is mostly upbeat.
Separately, Trump went on a rant about BRICS countries and not using the dollar. This is a canard, Trump will be long dead (and so will I) before BRICS countries have any kind of institutions in place to launch a collective currency. Yes, they’ll probably add to gold reserves and do more bi-lateral trade but these things move at a glacial pace.
That said, his line of thinking here doesn’t exactly jive with an effort to weaken the dollar, which is a risk I’m mulling. Still, this is sound and fury, signifying nothing.
Here’s how CFR senior fellow Brad Setzer sums it up:
Curious how former President elect Trump ever became convinced that the nowhere close to happening BRICs currency was a threat to the dollar …
It isn’t a good look, as it indirectly elevates the stature of a non-threat and suggests a lack of confidence in the dollar.
My personal view is that trying to coerce countries into using the dollar (which they voluntarily do now, apart from those facing serious sanctions) is actually a long-run threat to the dollar’s global role. It makes the use of the dollar appear to be a favor to the US And 100% tariffs would have essentially no impact on Russia, as there is almost no direct trade between the US and Russia right now..
Not sure Trump would like the results of a trade war with Brazil either, as it is a country that tends to use its surplus from exporting iron and ‘beans to China to buy US goods, and thus the US tends to run a bilateral surplus with Brazil.
The US does run a deficit with India (despite large US energy exports), but not sure that the US would really like the impact of 1 00% tariffs on India either — as it pushes India away from alignment with the US + makes India less attractive as a substitute for China.
And of course 100% tariffs on imports from China would be one hell of a shock to the US — Apple would have to pay $350-400 (the current import price more or less) per phone in taxes to the US government, so an iPhone price would go up a lot. And the price of a lot of parts that the US still imports from China would soar, along with the price of many consumer goods (until work arounds are found). So it isn’t in my view a credible threat to do 100% tariffs (the impact on the US would be huge) … and it is in response to chatter about a BRICs currency that is going nowhere and simply isn’t currently a real risk to the US economy. So I really don’t get it … and I certainly hope Mr. Bessant isn’t egging President elect Trump on here.
This article was written by Adam Button at www.forexlive.com.
