Post Tagged with: "United States"

Why Canada is the country to watch on Trump’s trade policy

Why Canada is the country to watch on Trump’s trade policy

If you want to know whwere Trump is headed on trade, don’t look at China or Mexico. Don’t even look at the UK. Canada is the country to watch for a number of reasons. First of all, Canada has an existing deal with the US and Mexico under NAFTA. That matters in terms of understanding where Trump is headed on trade. Moreover, Canada is also the 2nd largest trading partner for the US behind the European Union. Finally, the fact that Canada is finishing off its EU trade deal just as the UK is getting ready to exit puts it in a unique position in reconfiguring world trade alliances – wth an Anglo-American group involving Canada a potential outcome.

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The country to watch in 2017 is Turkey

The country to watch in 2017 is Turkey

If I could name three countries that will be particularly difficult for the US to deal with geopolitically, I would pick Russia, China and Turkey. The first two are obvious choices but the third is going to be equally tricky because of the increasingly heavy-handed way Turkish President Erdogan is cracking down on alleged Gulenists in the aftermath of last summer’s attempted Coup d’etat. It is Turkey’s unique relationship to the West via NATO and the increasingly authoritarian rule which will make the relationship tricky in 2017.

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Monetary offset, the strong dollar and China’s currency manipulation

Monetary offset, the strong dollar and China’s currency manipulation

With the Fed talking up the likelihood of three rate hikes in 2017 while other central banks are still in easing mode, the potential for a US dollar rout and a concomitant closing of the US trade deficit is pretty low. Therefore, given Donald Trump’s hawkish rhetoric on China, the potential that the US government labels China a currency manipulator for the first time since 1994 is high.

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Donald Trump the risk taker, trade war edition

Donald Trump the risk taker, trade war edition

This is a follow-up to yesterday’s post about Donald Trump and confirmation bias. But it’s going to be a different beast altogether because here’s where I am going to lay out my thinking about Trump and trade. Let me cut to the chase. I think there is a high likelihood that Trump starts a trade war with China. I’ve written about this before – twice! But now I want to outline some possible economic and geo-strategic outcomes based on this. Some of these outcomes are pretty good. But some are catastrophically bad.

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Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)

Donald Trump the risk taker, confirmation bias edition

My narrative is going to be that Trump is a risk taker. And the conclusion I have drawn is that this risk taking will lead to big surprises — some of them negative, but some positive. Afterwards, rather than give you a bunch of confirming information though — I’m going to tell you about my search for non-confirmatory data, because that’s how my process works.

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More on the coming trade war with China

More on the coming trade war with China

On Monday, I wrote a piece outlining how the US has pivoted away from China toward Russia. And the conclusion I drew from the circumstances was that this pivot will create a lot of geopolitical and economic uncertainty depending both on the importance of the actors on the world stage and the violence of the pivot. As US President Obama is constantly at pains to stress, Russia is not a major player economically. So the pivot toward Russia is one of geo-strategic importance. But the pivot away from China has economic implications. And China-hater Peter Navarro as Trump’s new trade czar is telling us the pivot will be violent.

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Why should the Trump Administration issue 50-year bonds?

As the Trump economic team comes together, their economic vision is also coming together. In the last post, I laid out some overarching themes I am seeing from them on the hopes that reducing taxes and regulation will increase productive capital formation and long-term economic growth. You can put all of these ideas under the moniker of supply-side economics. I am also seeing a few individual ideas I wouldn’t put under that umbrella including the extension of the maturities of government bond issuance. Here are some thoughts on that issue.

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Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)

Supply-side economics likely to dominate Trump’s economic agenda

Donald Trump’s vision of economics is becoming clear as he makes his cabinet picks. In particular, his picks of Steven Mnuchin as Treasury Secretary and Larry Kudlow as probable Chairman of the Council of Economic Advisors point to a more traditional Republican bent, which makes it less likely his policies will meaningfully reduce the income inequality which I believe was behind his surprise victory. Gary Cohn as NEC head is a bit of a wild card. Most likely, Trump will go for some variant of supply side economics, concentrating on lowering and simplifying taxes and making bilateral trade deals.

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The dollar bull market will eventually break something

The dollar bull market will eventually break something

With the fed having raised interest rates for the second time in ten years, in an environment in which US growth looks pretty good, we should expect more hikes to come. The question is whether the economy can withstand the hikes and what they would mean for markets. I have five asset classes to watch: Treasuries, the US Dollar, Emerging Markets, the Japanese Yen, and Gold.

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Upbeat about the near-term, dubious on the longer-term

This is a quick post about the US economy. To put it simply, I am upbeat about what the near-term holds for the US economy. I have lots of doubts about the longer term. But whereas I might have led with the doubts earlier in the year, as the year ends, I want to lead with the optimism.

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Tuning out political hysteria in the US

Ever since Donald Trump unexpectedly won the US presidential election, there has been an unending stream of anti-Trump tirades in the media. The emotions creating this wave of criticism make it difficult to have a reality-based view of the potential economic consequences of a Donald Trump presidency. So I am going to try to frame four issues of concern on an international level here that I think are relevant: Trump’s proximity to Russia, Trump’s proximity to big business, Trump’s hawkishness on China, and Trump’s hawkishness on Mexico.

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In defense of the Fed’s rate hike campaign

Thought I have been on recession watch for nearly all of 2016, I want to write this post as a reminder that there are upside scenarios for the US and global economy. The Federal Reserve looked forward and felt it could tighten into a slowing economy and rising dollar without the economy falling into recession. And so far, they have proved correct. Thinking of this business cycle in comparison to the last two, let me outline my thinking on what are upside scenarios here.

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