Well, the fallout from Gary Cohn’s White House exit was predictable overnight, but if anything, probably on the benign side, considering the gravity of the situation.
After all, with Cohn out, Peter Navarro is ascendant, and that’s not great when it comes to the future course of U.S. trade policy. Asian shares were off, but it wasn’t exactly a bloodbath, and as Bloomberg’s Mark Cudmore writes, “there have been pullbacks, but there’s no sign of broad panic and no hint that it portends a worse environment to come.” That relative complacency, Cudmore thinks, is a mistake.
For one thing, the fact that Trump effectively cut Cohn loose is evidence that Trump may be prepared to forsake his beloved stock market rally in the interest of keeping his “promise” on trade. Now who knows how long that willingness will ultimately last (that is, there’s probably only so many Dow points he could stomach), but for the time being, it looks like he’s willing to risk a selloff in the interest of checking another box off his list of campaign promises.
“Combined with threats of broader measures against China and talk of European retaliation, this is worrying for global trade and hence damaging for global growth,” the above-mentioned Cudmore continues, adding that “the negative impacts won’t stop there, though [as] the U.S. financial industry sector just lost its key ally in the administration, which can erode confidence for that sector and beyond into the wider economy.”
More generally, it doesn’t say much for the administration that still another top adviser is on the way out the door. Despite Trump’s assurances that “everyone wants a piece of the action” in his White House, it kinda seems like the reality is more akin to rats from a sinking ship.
For its part, USDJPY largely hung onto its knee-jerk reaction. “It’s hard to tell the impact of Cohn’s resignation, but as the market doesn’t like uncertainty, we’ll continue to see a situation where the yen will be bought,” Yuji Saito, executive director at Credit Agricole CIB’s FX department in Tokyo said. “USD/JPY could be put under downward pressure as Cohn’s departure makes the market nervous about trade issues at a time when fiscal-year end repatriation flows typically see yen demand picking up.”
“Markets may find it difficult to take fresh dollar long positions as risk aversion heightens after the resignation of Gary Cohn from the Trump administration,” Bart Wakabayashi, a Tokyo branch manager at State Street Bank & Trust told Bloomberg overnight. “It’s problematic to see another key official leaving the administration, which could be seen as them losing their trust in Trump,” he added, noting that “Cohn’s resignation could mean one less voice of opinion to oppose Trump’s tariff plan.”
WSJ’s account of this episode underscores the extent to which nationalists have “hijacked” the trade agenda, perhaps using Trump’s recent fragile mental state against him. To wit:
Cohn, though, was unhappy about the “process” by which Mr. Trump last week announced that he would be imposing steel and aluminum tariffs, the official said.
This person described the process as one in which White House proponents of the tariffs, on their own, slipped into the president’s office “at 6 o’clock at night” last Wednesday, then called steel and aluminum CEOS two hours later and invited them to a meeting the next morning, telling them the president would sign an executive order imposing the taxes even though no such order was ready.
“There is extreme frustration when the process breaks down,” the official said. In this instance, the official said, the White House “nationalists hijacked the process.”
[…]
The departure will put pressure on other advisers, especially Mr. Mnuchin, to make the case for preserving the post-World War II trade architecture the U.S. helped construct and for speaking credibly to financial markets.
“More than anyone else in the White House, Cohn had credibility with the markets,” said Ian Katz, a financial policy analyst at Capital Alpha Partners in Washington. “If we go several days without news of a replacement, investors could get edgy.”
“The Trump Administration’s proposals for steel and aluminum tariffs, and the reaction to this both in the US and overseas, have dominated the market’s attention for much of the past week [and] the risks of retaliation by other countries, potentially triggering a trade war, have generated considerable uncertainty in asset markets,” Credit Suisse writes, in a new note, adding that “the news of the departure of economic adviser Gary Cohn, and ensuing doubts about the administration’s ability to attract a comparably market-friendly replacement candidate, are likely to reinforce this dynamic in the near-term.”
Indeed. So we’ll see how it plays out on Wall Street. Again, the overnight reaction could have been worse, but this situation is likely to get worse before it gets better barring some kind of abrupt change of heart from Trump on the perceived “benefits” of upending global trade and commerce.
As Barclays notes, “free trade has become particularly unpopular with Republican voters,” so even as tariffs are certain to anger “friends and foes,” Trump may risk it because “bad economic policy might be smart politics.”
Great points as always. Trump may indeed be prepared to forsake the stock market rally, for a few reasons.
If he has even a room-temperature IQ, he knows that (a) it’s not sustainable for much longer, regardless of what the plunge protection boys do and (b) the statists will find a way to torpedo it anyway, to have another thing to blame him for.
So the smart thing for The Donald to do (unfortunately) might be to pop the bubble himself and get out in front of the story with his own narrative.
I know, it’s sick. But this is beltway politics we’re talking about…
I’ve been saying it for a year, “Trump’s purpose is to be the next Hoover.”
The dollar is now decisively in the red for the day, again, which is remarkable considering EUR/USD was already up ~300 pips in just the last 3 trading days. And JPY continues to crush the US even way more.
Asian and European equity markets are in the RED too, as are US stock futures.
Dollar remains dead on its back despite miserable string of big losses, but European stocks turned on a dime with the rumor that European Union and Asian TPP trade reps will meet to strengthen and possibly integrate trade ties. If so, then wow the US is economically isolated and probably screwed!
“Trade wars are good and winnable” will ultimately prove to be even more misguided than “the Iraq war will pay for itself” mantra of the last Republican administration.
Mr. Destructo.
If one pulls the camera back at looks at every single large policy move or government action that Trump has taken or engaged in, you’ll find one common thematic: destruction.
Whether it’s to clean air, clean water, clean waterways, economy, education, housing, trade, health insurance, health care, Medicaid, Medicare, diplomacy, law enforcement, judiciary, American values, America’s credibility, American democracy, efforts to reckon with climate change, civil rights, voting rights, constitutional rights, and the list goes on and on. Sure, you might point to tax cuts for the wealthy in the micro sense, but it’s been established beyond question, that in the macro sense the tax cut is wholly unnecessary and in the long run if not the short run, definitely destructive in a variety of ways.
If Donald Trump were not the President, but was sitting in his gilded cage in his Tower, and espoused every single policy and position towards Putin and the Russians that he does as President, the great normal majority of the American population would say that he should register as a foreign agent for the Russians, that he was Un-American, and that he is a traitor to everything America stands for and in fact is traitor. The fact that Trump is the President should lead inexorably to that conclusion.
In reference to your second paragraph, I believe that 50% of Americans would say they agree Trump’s actions on clean air, clean water, etc. benefit the U.S. contrary to your take. Trump may end up being recognized as one of the truly great Presidents of our time.
I find great difficulty in accepting that 50% of Americans prefer dirtier air, dirtier water, etc. I’m sure Trump is recognized today by the Russian Government as “the” truly great President of our time, and give you credit for the use of the word ‘may.’
In terms of “Where does Donald Trump rank on the list of American presidents?” as seen by experts who know a thing or two (Table 1, pages 2-3*), provides for a pretty good idea on “Table 1: Overall Presidential Greatness Ratings and Rankings,” Trump ranks dead last. *https://sps.boisestate.edu/politicalscience/files/2018/02/Greatness.pdf
See pages 13-14 for a summary of his other best, greatest, genius and stable accomplishments.
I’ll take bets that Americans would have to elect Martin Shkreli to the U.S. presidency to move Trump out of last place.
Not saying people prefer dirtier anything, only that EPA and other Agency Regs simply got out of hand causing significant costs not justified by the small impact many of the Regs. A common sense approach just seems better than an an all out business killing approach.
LOL that you would use the term ‘common sense’ relating to anything said or done by turmp! Now, using the term ‘business killing’ and relating to him, perfect sense, given his business history and all the bankruptcies he has filed.
Your continued effort to defend this lunatic only shows your ignorance.
I’m sure one can come up with instances based upon cases where that may be so, and if you have a few, show them in this space. But those who take your view that it’s just that “EPA and other Agency Regs simply got out of hand causing significant costs not justified by the small impact many of the Regs,” lose ground when Trump chooses an EPA director whose only known mission has been to side with water polluters chemical companies and spillers, air polluters, those who intentionally and repeatedly get caught violating EPA justified rules and regs that caused countless cancers and deaths, and an endless litany of destruction to communities around the country no more so than to rural communities that love Trump so much. The same communities that are hardest hit by destroying Obamacare, and in process to reduce or destroy benefits of Medicare, Medicaid and other healthcare services.
Mr. Destructo.
You are seriously delusional and clearly self-centered. The purpose of certain rules and regulations is to limit the damage done by careless manufacturing that cares not that the air quality is toxic as released from the smoke stacks or that the debris expelled into the waterways is contaminated by certain manufacturing processes. That water ultimately fills our reservoirs and supplies water to our homes and other businesses that rely on clean air and water to be as healthy as possible.
The reasons you and your kind don’t care is you have no concern for the continuation of life on this planet after you are dead. And your reason for this lack of concern is 100% related to your insatiable need to acquire as much money as you possibly can while you are alive…and then you are dead…what happens to all that money…any family you leave behind will not survive the toxic air and water you left behind. Fool.
So many other industries are adversely effected as well — medicine and science costs to study, diagnose, develop, manufacture, and treat illnesses as a result of toxic air and water. Research and medications and insurance costs are all trickle down related to your toxic air and water. and so much more.
So get your head out of your ass.
so here’s the thing
So here’s the thing. Delusional – maybe. Self-centered – Nope. I believe “my kind” do care as to what our Grand-kids face environmentally in the future and believe great strides have been made to clean up and end destructive actions by industry. Also believe that Regulations went too far and became too costly for the very small incremental improvements realized. Waterways such as Lake Erie and many, if not most, rivers have seen significant turn cleansing but the Law of Diminishing Returns and Unintended Consequences has taken hold it seems.
The only law that has been diminished is the one protecting the air and the water and the unintended consequence is your grandson may be born with 3 arms… but you will already be dead from the tainted water they used to manufacture your beer…all because assface in the oval office wanted more money for him and his rich friends.