Trump Tariffs News Provides Some Relief for Markets
As I have noted many times, when there is a key event markets tend to factor in the most extreme case and then reassess later.
The key event is the election of President Trump. The most extreme case would be across-the-board tariffs on imports from U.S. trading partners and broad tax cuts, which in turn run the risk of higher inflation that restrains the Fed from cutting interest rates. From a currency trader’s perspective, tariffs would have the greatest global im[act and is the main focus in the forex market.
While some selective increase in tariffs seems inevitable, logic says the threat of stronger action may be a stronger weapon to exact trade or other (e.g. border) concessions than the actual event.
I liken it to currency intervention where the threat is often a greater deterrent than that itself.
However, logic does not always work when President Trump is involved. Sometimes it is matter of expecting the unexpected. Other times it is not to take one of his many tweets of comments at face value.
So, we will see whether the most extreme case or a more logical scenario plays out.
News Alert
Just as I was about to post this article, the following news hit the wires. As posted in our Forex Forum
The swift reaction to the headline was consistent with what I noted about market’s factoring in the most extreme case and then looking to reassess after. It is also nice to see logic working out in a market that can remain illogical more than one can stay solvent.
In any case, actions speak louder than words and stay alert as President elect Trump has no shortage of words
Addendum: Get used to life in Trumpworld
President elect Trump just said the WAPO satory is wrong.
Suggested reading: Trading Tip: Beware of a New Year Whipsaw
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