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Investors Must Remember: 'Trump Remains Trump'

Investors Must Remember: 'Trump Remains Trump'

(Getty/Andrew Burtin)

Thursday, 12 January 2017 07:06 AM Current | Bio | Archive

The main message investors could infer from yesterday’s first formal press conference since his election is that “Trump remains Trump.”

The content of the press conference was not especially insightful for investors as any stimulus talk was skipped, but the style of the conference was surely different.

When President-elect Trump stated: “We don't make good deals anymore; we make bad deals. Our trade deals are a disaster. We have hundreds of billions of dollars of losses on a yearly basis -- hundreds of billions with China on trade and trade imbalance, with Japan, with Mexico, with just about everybody. We don't make good deals anymore,” he made it crystal clear that he will stick with what he said during the campaign on tariffs on imports, which is by the way, the one area where the President has real economic power in the sphere of international trade. The President can effectively impose tariffs unilaterally.

Investors could do well keeping in mind that most economic policy aside from trade involves Congress.

I’m not going to touch the stories that are swirling around about fake news, U.S. intelligence, Russia, hacking, politics and so on and leave them for what they are, at least so far at this stage, stories that will have to wait for neutral, transparent, and final assessments for which, of course, only God knows if that will ever occur.

So, let’s look somewhat more in detail to some of the statements (exact) that the President-elect gave on trade related issues.

When answering a question on building a wall at the Mexican border: “… We're going to build a wall. I could wait about a year-and-a-half until we finish our negotiations with Mexico, which will start immediately after we get to office, but I don’t want to wait … Mexico in some form, and there are many different forms, will reimburse us and they will reimburse us for the cost of the wall. That will happen, whether it's a tax or whether it's a payment -- probably less likely that it's a payment. But it will happen.”

In simple words, the trade relations with Mexico, China and even Japan will definitively enter the protectionist sphere the U.S. is headed for.

Nevertheless, Trump at his press conference repeated in fact what the, in his words of course and not as extensively, the recently released 2016 Report to Congress of the U.S.-China Economic and Security Review Commission informed us.

There is no doubt that he will take measures because he has all the power to do that and he will most probably call China a currency manipulator, which President Bill Clinton did during his presidency in 1994.

Not surprisingly, today, the China Commerce Ministry rejected U.S. trade claims.

Also interesting was when he said: “… when you want to move your plant to Mexico or some other place, and you want to fire all of your workers from Michigan and Ohio and all these places that I won, for good reason, it's not going to happen that way anymore … You're going to pay a very large border tax.”

In simple words, import levies on U.S. imports are coming. In this context, the U.S. import price inflation data that is due today could be worth a look. While import price inflation may not be a key focus right now, it could become increasingly important in the United States as talk of tariffs will start to swirl around. Never forget, tariffs are just a tax after all. Indeed, this is one of the original purposes of tariffs. Therefore, the consequences of tariffs for the prices U.S. consumers pay is going to be rather relevant.  

Finally, for investors it’s interesting to see how the dollar weakened since the press conference, which in itself shouldn’t bother that much the President-elect.

Keep in mind that than candidate Trump said in August 2015: “It sounds good to say we have a strong dollar. But that’s about where it stops.”

He said this at a moment when the dollar index (DXY) quoted a little bit more than 4 percent lower than where it stands today.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

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The main message investors could infer from yesterday's first formal press conference since his election is that "Trump remains Trump."
donald trump, investors, press conference, economy
Thursday, 12 January 2017 07:06 AM
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