Versus Trump 4-0 markets: because the president is losing the game (and credibility) with the financial system

There are more powerful numbers even than the President of the United States. Since the beginning of the year, equity markets in America have lost about 5,700 billion dollars in value, over twice and a half times the gross domestic product of Italy; from their peak of February to the lowest point recorded two weeks ago, The destruction of equity value in the United States (not to mention the markets of the rest of the world) had reached 11,600 billion dollarssomething like 10% of the gross product of planet Earth.

VS Trump markets

This is enough to explain the result of the match hired by Donald Trump against international trade and even against the structures of economic institutions in its own country. The partial, for the moment, is: « Mr. Market 4 – Donald Trump 0 « . Obviously the game is not over, perhaps not even the first half is. But already four times in a few weeks the equity, currency and fixed income markets folded the most powerful man in the world; They forced Trump to a quick and sudden correction of course. To get an idea, just retrace the film of the last few weeks back, starting from the end: the meeting that the president held with the press in the oval studio in the American evening of yesterday, which records two showy backgrounds.

Attacks against Powell

The first concerns the Federal Reserve and the temptation of the White House to try to replace its president, Jerome Powell, with a figure more controllable from political power. Trump in the last few days had called Powell « Mr. Too Late  » («Mr. Latesto»), a « loser » and had invited him pressing to cut the interest rates; Above all, he had tried to download the fault of the perceptible slowdown of the American economy on him and had overlooking the possibility of a Defenestraction of Powell himself, who would also be at least questionable in terms of constitutional legality in the United States.

Capital escape and reverse

« If I want to send him, he will be really quickly out, » Trump had said days ago about the head of the Fed. The economic councilor of the White House Kevin Hassets had added Friday, on the option of the dismissal of the central banker, that « the president and his team will continue to study this question ». Tonight he moves back: « I’m not going to fire him, » Trump repeated three times by answering a question about Powell. Nor is it difficult to understand why: The threats to the independence of the Central Bank had triggered a capital escape from the United States and the dollar. The green ticket had lost 6% on the Swiss franc in just four days and the gold had recorded a market performance of 40% higher than that of the American stock exchange since the beginning of the Trump presidency, because investors have proven to be very rapid in questioning the role of the dollar as the dominant currency of the international financial system.

The change of course on China

Always tonight Trump’s second back march, this time on China and stratospheric duties at 145% imposed after a quick round of retaliation followed by the « liberation day » of the « mutual rates » announced last April 2. Yesterday the correction of course, imposed by the collapses of the stock exchange intervened in the meantime. Trump said: « I will play in a nice way with China, I don’t see the need to play hard – he said -. The final duties will fall substantially and will not be 145%, even if they are not at zero ». It should be noted that from Beijing up to now, openings have not come, but only further retaliation, with duties raised in a mirror way to 125% on the products imported from the United States.

More than the hard line of China, it must have been that of the markets to have folded the hand of Trump. After all, he had already done so at least two more times in the previous days. On April 9, the president « suspended » for three months the « mutual » duties on 184 countries, preferring for the moment a lower and equal rate for all of 10% pending negotiations (everything took place at the end of a catastrophic week on the markets, in which sales had also started investing the American government bonds). And on 11 April Trump always announced another « exemption », this time to super-Dazi against China, reserved only for consumer electronics products. Also in this case, it is not difficult to understand why: the Californian Apple, which produces about 80% of its smartphones in China, had seen 650 billion dollars of its market capitalization volatilizing himself in a few days after the announcement of the duties against Beijing.

The lesson for Europe

So four times in two weeks Trump challenged the markets and had to quickly beat in retreat. Certainly, also following enormous pressures exerted in private on him by the great financial interest and big tech in the United States. The president’s caravan runs fast but continues to skid, tossed by forces with which he had not done the background to the end. For Europe, which on duties prepares to negotiate with him, there is something to take note of.