On Uncertain Tariffs....

President Donald Trump's recent move to impose tariffs, after which he ordered a sudden postponement of 90 days, has brought mammoth uncertainty which could well be deterring foreign and domestic investors from taking long-term bets on the United States because the prospect of immediate policy u-turn looms over their heads.

Even while drafting this he's done another U-turn by announcing focused tariffs on semi-conductors and meds, and a few other things and probably a few more, at some rate, by the time this goes live.

The initial reaction to April 2's general tariff announcement precipitated a steep decline in world stock markets, with the S&P 500 falling over 10% in two days. This market volatility was compounded by a simultaneous selling of U.S. Treasury bonds, traditionally viewed as safe-haven assets. Yields on 10-year Treasuries rose from 4.20% to 4.43% over just four days, the most rapid increase since 2008.

The reaction of the bond market was so harsh that it is said to have played a role in the administration's decision to suspend the tariffs. But of course according to Trump this was all part of the plan...

But if this is the plan, how on earth is this level of uncertainty going to encourage anyone to commit to a long-term vest into the U.S....?

The damage is already telling... companies like StubHub and Klarna putting on hold plans for public listings. Furthermore, the volatility in the bond market has also led to concerns over the ability of the U.S. government to finance its debt, as foreign investors, particularly China and Japan, may reduce their holdings of U.S. Treasuries.

Final thoughts..

I don't think there's a way forward for all this flip-flopping and back of the fag packet policy making, restoring confidence in the US will likely require firm, consistent policies and a commitment to sound economic rule.​

Posted Using INLEO