The great Washington "Who Dunnit" was launched this week. It was the search for the anonymous author of the Op:Ed in the New York Times. A damning revelation of life in the White House and the vagaries of life with the President.
The week had not begun well. Bob Woodward released his new book "Fear, the story of Trump in the White House". The book opens with a shocking anecdote about how the President's closest advisors seek to thwart the directives of an unreliable and unstable President.
In one instance, according to the Washington Post, Trump had ordered a letter announcing the U.S withdrawal from a trade agreement with South Korea. The then Chief Economic Adviser, Gary Cohn, realised the initiative would be a disaster for U.S. policy. The solution for Cohn, just take the letter out of the President's in tray. Out of sight out of mind, Trump's limited attention span would buy time and short circuit Trump's impulsive policy pronouncement. No fan of GTD, the President doesn't even keep a list apparently.
Members of staff would frequently work together to block the President's most dangerous initiatives. Jim Mattis Defense Secretary ignored an order to assassinate Syria's President Bashar al-Assad? Top Brass ignored the President's diktat on trans gender people in the military. Trump's views on world trade are evident. On one speech he had written "Trade is Bad". When Cohn asked the President why he clings to such beliefs, the President responds: "I just do, I have had these views for thirty years".
The book "a work of fiction" according to Trump was bad enough. Then followed an anonymous editorial in the New York Times. "I Am Part of The Resistance Inside The Trump Administration" the article declared. I work for the President but like minded colleagues and I have vowed to thwart parts of his agenda and his worst inclinations. The root of the problem is the President's amorality and lack of principle. A disrespect for free minds, free markets and free people. Declaring the Press as the enemy of the people is dangerous. Trump's impulses are anti democratic and anti trade.
The President's style is impetuous, adversarial, petty and ineffective. He engages in repetitive rants, off topic and off the rails. Impulsive responses lead to half baked, ill informed, reckless decisions which have to "walked back".
Trump has also a extended capacity for mendacity. Advised not to testify to the Mueller investigation, "It's either that or an orange jump suit" advised Attorney John Dowd in March. The President's ability to avoid reality would make it difficult to avoid the inevitable lies under oath, the suggestion.
Uncle Sam is hiring ...
Meanwhile Uncle Sam is hiring. Unemployment is falling. Job growth continues. Non Farm Payrolls grew by 201,000 in August. Over 153 million Americans are now in work. The unemployment rate fell to 4.3%. Pay rates increased by 2.5%. The US economy is expanding rapidly.
The US economy will grow by around 3% this year. US inflation is 2.9% in the latest figures and set to move higher. Borrowing is increasing, a function of tax cuts and expansive spending plans especially on the military. Ten year bond yields increased to 2.94% as Fed hikes loom.
The trade deficit is increasing a function of strong growth relative to the rest of the world. The U.S. trade deficit rose to a five-month high in July, with the politically sensitive gap with China hitting a record high.
The Commerce Department said the trade deficit increased 9.5 percent to $50.1 billion as exports of soybeans and civilian aircraft dropped and imports hit a record high. Government’s policies including the $1.5 trillion tax cut package early this year will worsen the trade deficit. The fiscal stimulus has boosted consumer and business spending, drawing in more imports.
US investment increased by 7% in the second quarter. The U.S. cannot enjoy an investment boom without a surge in imports of capital goods ... the deficit is set to move higher ...
"Trade is bad" ...especially with China
Trump threatened to extend the tariffs on imports from China this week. Traveling on Air Force One, Trump told reporters he could put tariffs on a further $267 billion of Chinese goods "If I want to".
This is in addition to the initial round of tariffs on $50 billion, followed by a second wave $200 billion. The remarks prompted a 100 point drop in the Dow Jones average.
Apple warned that tariffs would raise prices for US consumers. Prices for the Apple Watch and Air Pods would be hit. Adapters and Charges for most products would also be hit.
"It is difficult to see how tariffs that hurt U.S companies and U.S consumers will advance the Government's objectives with regard to China's technology policies" the company explained. "We hope you will reconsider these measures and work to find other more effective solutions that leave the U.S economy and U.S. consumer stronger and healthier than ever before."
Trade is bad, the probable response. The President is hoping to close the deal with Mexico and Canada ahead of the mid terms. Europe and Japan are set aside for the moment. China remains public enemy number one. The President needs a pantomime villain on stage in the run up to November ... China fits the bill despite the damage in the short term ...
Don't Miss Our Monday Morning Markets ...
Don't forget! Monday Morning Markets is back. The update is released every Monday Morning at around 8:00am. We look at key stock markets, bond markets, interest rates and currencies every week and monitor trends and direction in key areas.
Last week our eToro "Empires of the Cloud" was hammered as tech and NASDAQ stocks took the hit. Our nine index tracker fund was off by over 2% as fears of trade wars and Brexit uncertainty dominated sentiment ahead of any September shakedown. Don't miss that!
That's all for this week, we will be back next week, with more economics and market analysis. We may even talk about the UK economy next week
Have a great weekend,
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
|The Saturday Economist|
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.