As Trump’s cabinet fills out and markets price his administration’s economic impact for perfection, investors have to wonder if the new team can actually deliver.
Asia and economic expert Eamonn Fingleton, the only other analyst I know of predicting a Republican/Trump victory back in February, has some sage insight and advice for America’s tough road ahead.
In short, Fingleton identifies Trade and Immigration as the key issues for American voters and the economy. Pundits failed to give these issues proper consideration during the election (thus missing Trump’s appeal), and will likely continue toeing the corporate-establishment line of free trade orthodoxy. This would be a massive mistake.
A more recent Fingleton interview reveals that:
‘America was for its most successful decades very protectionist .. The entire federal government from the George Washington administration to the Abraham Lincoln administration was funded by tariffs a hundred percent. From the Lincoln administration to World War One two thirds of the government was funded by tariffs. World War One to World War Two, one third of the government was funded by tariffs. And now, our tariffs are pretty much non-existent.’
Though Trump may be able to storm his way through transnational trade agreements, demolishing any legal defenses against a more autarkic, protectionist US trade regime, the level of domestic investment and coordination necessary to re-industrialize presents a daunting challenge. Though the historical precedents of post-WWII Germany, Japan, and even China provide examples of success, some level of great power war, foreign invasion, and widespread destruction came first (a subject for another day).
For the time being we’ll let the qualified hypothesis stand, that a return to America’s days of industrial-trade greatness will not be a smooth transition. At best, we’ll see a euphoric blow-off in US equity markets, as masses of money flee negative/zero rates abroad, and rising rates in the US, to chase hopes of fiscal stimulus and “war bride” re-armament in the United States. As we’ve seen numerous times throughout history, however, the realities of trade and real war are no good for the average investor’s returns, much less the national economy.
TickerTruth Major Assets reflects many of these themes:
Darshan Dorsey, Founder, Dorsey Intelby