No. of Recommendations: 26
It is quite clear what Trump is doing with tariffs because his guys have written the strategy down and the document is public. Importantly, tariffs are linked to a global currency realignment, as well as to national security realignments, so if you think tariffs and trade is all that is going on, then read the document "A User's Guide to Restructing the Global Trading System" by Stephen Miran, linked below.
https://www.hudsonbaycapital.com/documents/FG/huds...Stephen Miran is now head of Trump's Council of Economic Advisors. The Tresaury Secretary is now Scott Bessent, who also buys into this line of thought. Lower lying positions are also filled with people who buy into this. I extract some relevant bits of this long document later.
It is similarly quite clear what Trump is doing with the domestic situation i.e. cutting government etc. It too was all written down and made public, in the Project 2025 document
https://static.project2025.org/2025_MandateForLead...The architect of Project 2025, Russell Vought, is now Trump's director of Office of Management and Budget (OMB). Lower lying positions are also filled with people who buy into this line of thought. Musk came along and accelerated things by using a chain saw.
Back to tariffs:
If you think tariffs are just about trade, read the Miran document linked above, or at least the excerpts below. Tariffs are not just about trade, they are part of a plan to restructure trade, the global currency system,
and national security associations. Miran's document is quite dense, you can get a summary from Gillian Tett of the Financial times in this interview with her
https://www.youtube.com/watch?v=3PXVrLH4zSU&t=1700...I extract some relevant bits of Miran's (head of Trump's Council of Economic Advisors) document below. If you read nothing else, read points (1), (2), and (3) in the middle paragraph (my emphasis in bold):
From "A User's Guide to Restructing the Global Trading System" by Stephen Miran, head of Trump's Council of Economic Advisors
START QUOTE
Instead, recall that President Trump views tariffs as generating negotiating leverage for making deals. It is easier to imagine that after a series of punitive tariffs, trading partners like Europe and China become more receptive to some manner of currency accord in exchange for a reduction of tariffs. As currency accords are typically named after resorts where they are negotiated, like Bretton Woods and Plaza, with some poetic license I'll describe the potential agreement in the Trump Administration as others have done as the prospective "Mar-a-Lago Accord." However, there are many differences between the economy today and that of the 1980s. For one thing, gross U.S. debt as a share of GDP is now in excess of 120%, relative to roughly 40% when the Plaza Accord was agreed. That drives concerns about the consequences for the debt market that didn't exist in the 1980s.
One suggestion put forth in Poszar (2024) is for any accord to incorporate a duration agreement. Poszar's hermeneutics of the remarks of likely economic policy leaders in a second Trump Administration explicitly links the U.S. provision of a security umbrella to the international financial system, and infers that efforts to reduce interest rates can help finance the security zone. He synthesizes the following Mar-a-Lago Accord from potential policymakers' remarks:
1) security zones are a public good, and countries on the inside must fund it by buying Treasurys;
2) security zones are a capital good; they are best funded by century bonds, not short-term bills;
3) security zones have barbed wires: unless you swap your bills for bonds, tariffs will keep you out.
To strengthen their own currencies, reserve managers must sell dollars. As their currencies appreciate, the United States will receive a competitiveness advantage helping our tradeable and manufacturing sectors. To help mitigate potential unwanted financial consequences (like higher interest rates), reserve selling can be accompanied by term-out of remaining reserve holdings. Increased demand for long-term debt by reserve managers will help keep interest rates down, even if there is overall selling of USD fixed income as a result of the currency adjustment. Reserve owners hold fewer USD reserves, pushing their currencies higher, but the reserves they do hold are longer duration, helping contain yields. If the term-out is into special century bonds as suggested by Poszar, then the funding pressure on the U.S. taxpayer for financing global security is significantly alleviated. The U.S. Treasury can effectively buy duration back from the market and replace that borrowing with century bonds sold to the foreign official sector. Such a Mar-a-Lago Accord gives form to a 21st Century version of a multilateral currency agreement. President Trump will want foreigners to help pay for the security zone provided by the United States. A reduction in the value of the dollar helps create manufacturing jobs in America and reallocates aggregate demand from the rest of the world to the U.S. The term-out of reserve debt helps prevent financial market volatility and the economic damage that would ensue. Multiple goals are accomplished with one agreement.
END QUOTE
It is debatable whether Trump understands in any detail either Project 2025 or the User's Guide to Restructing the Global Trading System. But he apparently understands enough to feel that both programs resonate with his own core beliefs, so he installed people to execute the published plans, and then let it rip.
The people Trump put in power to execute the domestic plan and to execute the international plan are not stupid or ineffective people. But just because you're bright, and effective, doesn't mean that you're not completely bat shit crazy. Having bright, effective, crazy people in power is extremely dangerous to both the U.S and the world. Then add in Trump.
I've started exploring ex-U.S. defense sector stocks.
