This is the Guardian's reaction to overnight financial trading in Asian stock and money markets:
Stocks in Hong Kong, fell nearly 2% while China's markets remained closed for the lunar new year holiday break.
Japan's Nikkei share average tumbled as much as 2.3% in early trading, and Korea's Kospi fell as much as 2.4%. Taiwan's Taiex fell 4.4% at the open, led by a more than 6% plunge in semiconductor heavyweight TSMC.
In the US, S&P 500 futures slid 1.6% and Nasdaq futures slumped 2.2%. European futures fell as much as 3.4%.
The US dollar shot to a record high of 7.3765 against the Chinese yuan in offshore trading, and its highest against the Canadian dollar since 2003 and the strongest against the Mexican peso since 2022.
The euro fell by as much as 2.3% in response to Trump's latest tariff threat, to near parity with the US dollar at $1.0125, the lowest since November 2022, before recovering to reclaim levels above $1.02.
Bitcoin was down by more than 6% to about $93,000. Ether, the second-largest cryptocurrency by market value, fell as much as 27% to $2,135, before paring some losses.
There are a number of thoughts that flow from that.
Firstly, so much for markets supposedly pricing in future risk at any point in time. Trump has only done what he said he would do, and yet they all seem to be caught by surprise. They were either not paying attention, or did not believe him when they should have done, or are simply very far from being the efficient entities that they claim to be. Quite possibly, all three are true.
Secondly, Trump weighs his success with the movement in stock market values. This fall is going to hurt him very badly. He will, of course, claim that markets are wrong, but now they have reacted, it's undoubtedly appropriate that the market prices are down. All that I would suggest is that they have not done so by enough as yet, and more falls are to come. There is no one who can think that what Trump is doing is going to add to corporate well-being or the well-being of people in the US or anywhere else. This was all entirely predictable - and I did predict it. Now people will notice.
Third, this fall and what might follow will hurt his donors. They will not be amused. His honeymoon might be even shorter than that of Keir Starmer.
Fourth, Trump's admission over the weekend that tariffs will impose pain in the USA might come as a shock to many Americans. Only a couple of weeks ago, Trump was assuring them that tariffs were going to make them very rich. Now, they are offering hard times and a fall in the value of their savings (if they have any). The promise is of benefit in the future. Sometime soon, they are going to realise that this means a long time in the future. The claim is akin to that of Jacob Rees-Mogg about Brexit, where he thought the benefits might be seen after 30 years. The US electorate is a very long way from being that patient. In both cases, the promise of future benefits was also false: the supposed deferral was simply to disguise that fact. The MAGA will not be amused.
Fifth, aggrieved markets may not take to Trump's actions very well, and those who operate in them might speak out. Trump will then have to explain why they are another 'swamp' that needs to be cleared. I am not convinced that will work.
In summary, sometime soon, people will realise that there is no good news from Trump. The question is, then what?
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Ah yes MADA “Make America Depressed Again”! Certainly the inevitable inflation Trump will cause in the United States by his ill-thought out tariff policy could push the country into recession. This will make matters worse for the UK on top of Brexit.
Watching MSNBC over the weekend where a commentator said:
1. Trump renegotiated the trade deal with Mexico and Canada during his first presidency.
2. What’s wrong with “his” deal?
3. Trump is only hitting allies not perceived ” enemies”. Why? Because Trump is a bully and essentially a coward.
4. The US main stream media, Wall Street. the Republican party have ignored what was likely to happen and are as they say not going to “call Trump out”.
5. The Democrats need to wake up.
Sounds very similar to the UK??
I saw him saying how unfair the EU is by imposing VAT on imports rom America.
I think it is the case VAT is applied on (some ) goods whether they are imported from any country and also on goods made in the EU.
The ‘genius businessman’ surely knows these things. Certainly the people on his staff do.
It would seem 1) Trump believes his own propaganda and those around him don’t contradict him
2) or he is just lying thinking his supporters will not know or will support him whatever.
Madness.
For resins that are baffling the US funds VAT impossible to understand, which is why almost they alone do not have one.
Do they perhaps resent seeing “the visible cost of big government” so prominently displayed on every receipt and invoice?
S+P futures are down1.5%. Not sure they have really taken this in yet.
Agreed
I felt a weird sense of satisfaction yesterday when Trump admitted that tariffs were going to be tough. It’s an acknowledgment that he has been lying. He’s never been so off track that he didn’t realize tariffs would hurt people—there are too many smart people around him for him not to know that. He just doesn’t care, that’s more believable.
But then, there’s the irrationality or lack of understanding among those who voted for him. This is an interesting watch, even if sad: https://www.youtube.com/watch?v=xwZT_nisxsQ
Similarly, before the election he had said he was going to make prices go down, and only a few days after the election he said that making prices go down was a very difficult thing to do.
I’d be interested in seeing opinion polls about Trump 6 months from now, see if those who voted for him have had a change of hearts.
These days I am becoming more and more interested in failures of rationality – confirmation bias, etc. They have always existed but I think politicians and social media are exploiting them.
Cognitive dissonance research would suggest that the MAGA faithful will split into the disillusioned and those whose faith in the Oompa-Lumpa is reinforced. A substantial bunch will stick with him, as will the militias.
An equal concern must be that Musk has his hands on the Treasury payment system. It would seem the coup is well under way.
Agreed
I have not dealt with that as it appears well covered elsewhere
If these market movements were predictable (and they were), then traders will have made a lot of money from them. Nothing new there then.
But in terms of the ordinary Greyhound bus passenger, the thing they will notice is domestic price inflation, as imported goods go up because of the tariffs, and job losses as any US exports their jobs depend on are affected by the strong dollar and retaliatory tariffs.
They will also notice healthcare changes, especially if they find themselves jobless, and they will suffer rising levels of infrastructure disruption and shortages.
All this was predictable.
But what isn’t predictable is what they will DO about it. America is a polarised, heavily armed, tense fearful angry society prone to violence.
I don’t have much confidence in the Democrat leadership to respond positively for the good of ordinary Americans. If they could connive at genocide in Gaza & the West Bank, then they will not be moved by the plight of the vulnerable “deplorables” at home.
The question I find myself asking is, not “what could go badly wrong?” (that’s easy – lots!), but “is there a safe way out of this?”, and “how can the most vulnerable be protected?”.
I’m afraid I don’t know the answer to those questions, but I hope there are people all over USA state and federal government and administrations making plans to prevent carnage, rather than merely to gain political advantage in the next set of elections.
It would be amazing if Trump had a Truss moment. Maybe CNN should get a lettuce ready. Or a bag of oranges.
That said, I don’t really see any path for him being removed from office even if there was a massive market crash, he has made it pretty clear he wants to be in power as long as he can. Right down to those remarks in the run up to the election about this being the last time people will need to vote. I also don’t see his cabinet going quietly either, Musk has got into power gutting government and he isn’t going to give that up without a fight. So even if there was movement in his party to kick him out, even if the press and industry turned on him, even if there were protests from his core voter base, it’s likely he would double down and things would get worse still.
It would be amazing if he wasn’t able to complete his term, couldn’t agree more, but, realistically:
1. Differences between presidential and parliamentarian political systems – far more difficult to sack a president, a president has independent and direct democracy legitimacy, whereas a PM doesn’t
2. A market crash affects us all worldwide, always causing poverty – careful what you wish for
Same old mantra “pie in the sky when you die”. Success is always just round the corner especially when it isn’t. Trump has made himself the poster boy for the “Dunning Kruger” effect.
President Donald Trump does not herald the advent of fascism. He heralds the collapse of the veneer that masked the corruption within the ruling class and their pretence of democracy. He is the symptom, not the disease.
The loss of basic democratic norms began long before Trump, which paved the road to an American totalitarianism.
Deindustrialization, deregulation, austerity, unchecked predatory corporations, including the health-care industry, wholesale surveillance of every American, social inequality, an electoral system that is plagued by legalized bribery, endless and futile wars, the largest prison population in the world, but most of all feelings of betrayal, stagnation and despair, are a toxic brew that culminate in an inchoate hatred of the ruling class and the institutions they have deformed to exclusively serve the rich and the powerful.
The Democrats are as guilty as the Republicans.
You can aim the same critique at the UK from Thatcher onwards, culminating in the Single Transferable Party.
Does Trump talk much about tariffs being used to grow US production? I don’t recall much.
But one theory is that the increase in the price of non- American goods will stimulate local US businesses to produce alternatives at lower prices.
Admittedly, this sounds difficult to believe,except as a really long-term prospect.
But might Trump and the others actually see this as a valid strategy?
Though I am reminded of some recent conclusions here about how accumulated wealth in the hands of the already-rich just doesn’t get used positively.
I see little chance that this will happen
Tariffs are about shifting the tax burden onto lower income people. That is it, above all else.
Hail, Simplicius the Thinker!
May I urge readers of this blog to visit Simplicius’ site? There you will find conflict analysis, geopolitical
commentary of the highest order, plus a side of culture and politics, with a strong dash of the sardonic.
In short a help in desperate times.
Glad you have winged in to Funding the Future, Simplicius, and hope you will continue to add your
piercing accuracy to the debates therein. https://simplicius76.substack.com/
Thanks
What a difference a couple of months makes.
I’m recalling being in a charity trustees meeting on the USA election day. The financial advisor was calling it for Trump and showing us the figures for how that improved the investment account numbers. I recall thinking at the time that this was more based on expecting him not to do what he’d said -except for tax.