The greatest issue concerns the dollar
President Tump is wielding tariffs to try to close the massive U.S. trade deficit in goods, which he sees as a sign of economic weakness.
It is only part of the trade story. While the U.S. buys more goods from abroad than it sells, the opposite is true for services, which include everything from streaming subscriptions to financial advice.
As the U.S. imported more goods from abroad and domestic factories closed, its goods trade deficit swelled to a record $1.21 trillion by 2024.
At the same time, the U.S. services trade surplus grew to $295 billion last year
The new tariff regime is not reciprocal to anything, but instead is retaliatory in proportion to how big a surplus in goods trade a country happens to have with the US.
The greatest issue concerns the dollar.
Relative to the rest of the world, US assets have boomed ever since the Global Financial Crisis and went into overdrive after the pandemic stimulus programs in 2020.
At that point, America let the liquidity flow, and attracted massive flows from other countries into its stock market.
Apple market cap almost touched $4 trillion three months ago. Now it’s nearly back to $3 trillion.
The growth in European holdings of US stocks has been breathtaking
It’s a classic example of what the hedge fund manager George Soros, mentor of US Treasury Secretary Scott Bessent,
calls reflexivity, or the ability of the market to create its own reality.
John Authers Bloomberg 4 april 2025 at 07:00 CEST
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