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Trump’s Trade Policies Only Make the Dollar Stronger

First published: Bloomberg Prophets, 9/02/2017

Donald Trump is off to a controversial start as U.S. president, but for the most part financial markets have been fairly relaxed about American and global economic prospects despite the lack of any precise contours for the new administration’s fiscal strategy.

In fact, the markets have barely discounted the risks of trade and currency conflicts. What they should prepare for is a significantly stronger U.S. dollar, and greater weakness in U.S. bonds, commodities and emerging markets. The implications for equities are more nuanced.

The president and several key nominees haven’t sought to obfuscate how they think about trade. For them, it’s a zero-sum game in which there can only be one winner, and in which the interests of U.S. suppliers of exports and labor take precedence over those of Americans as consumers of imports. Regional trade agreements such as the Trans-Pacific Partnership that are built around the establishment of rules and the economics of supply chains are out, while bilateral arrangements in which the U.S. can bring to bear its economic heft and leverage are in…..Read more: