MacroVoices #464 Michael Every: Lines on Maps vs Lines on Screens
Jan 23, 2025
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Michael Every, a Global Strategist for Economy and Markets at Rabobank, dives into the implications of a potential Trump 2.0 presidency on market volatility. He emphasizes the link between geopolitical shifts, especially regarding U.S.-China relations, and financial market movements. The conversation highlights the significance of tariffs in shaping economic strategies and the changing perceptions in Europe about the U.S. Every also touches on the intricacies of reshoring manufacturing and the critical role of Rabobank in sustainable agriculture.
Volatility is expected to be a central theme during Trump's second term, driven by unpredictable shifts in political and economic conditions.
Economic statecraft signifies a shift in U.S. policy, using economic tools like tariffs as means for achieving national security and foreign policy goals.
Trump’s strategies could initiate major trade conflicts affecting the global economy, compelling investors to navigate potential currency depreciations and competitive devaluations.
Deep dives
Emphasizing Market Volatility in Trump's Second Term
The discussion highlights that volatility is expected to be a significant theme during President Trump's second term. Rapid shifts in political and economic conditions have already illustrated this with unexpected news impacting market behavior. For instance, Trump's immediate tariff threats on Canada, Mexico, and BRICS nations have created uncertainty in financial markets, indicating that investors should brace for unpredictable fluctuations. This volatility suggests that understanding geopolitical implications will be crucial for investors navigating the changing landscape.
The Importance of Economic Statecraft
A key concept introduced is economic statecraft, which transcends traditional economic policy aimed at achieving domestic goals. Economic statecraft involves using economic tools to fulfill national security or foreign policy objectives, reflecting a profound shift in how the U.S. might strategize under Trump. An example given is the potential use of tariffs not merely as economic tools but as levers for altering the behavior of other nations, highlighting a dual function of these policies. This calls for investors to recognize the broader implications of such economic decisions on global relations and market stability.
Potential Trade Conflicts and Their Implications
The dialogue explores the ramifications of potential trade conflicts, particularly concerning China and the U.S. The likelihood of tariffs on Chinese goods remains a critical worry, as this could lead to a depreciation of the renminbi and provoke competitive devaluations across various countries. Such actions would not only disrupt commodity prices but also have sweeping implications for the global economy, affecting trade balances and investment strategies. Investors must stay vigilant, as actions taken by Trump could instigate significant shifts in international trade dynamics.
Assessing Trump's Strategic Intentions
The discourse suggests that Trump’s intentions are to reinforce American primacy on the global stage, employing a mix of economic and military strategies. This may lead to heightened tensions, especially in response to China’s actions in the Asia-Pacific region and Russia’s movements in Europe. By moving lines on maps and asserting influence over neighbors, Trump’s presidency may create conditions ripe for conflict while simultaneously aiming to negotiate power dynamics favorably for the U.S. Investors should consider how these strategic moves can reshape market expectations and economic relationships globally.
Impacts on Financial Markets and Future Predictions
There is an acknowledgement that Trump's economic policies could lead to drastic shifts in financial markets, particularly affecting the U.S. dollar and commodity prices. If the U.S. moves toward re-shoring manufacturing, there may be immediate inflationary pressures due to higher domestic labor costs. However, this approach could also enhance the dollar's value over time as tariffs and production shifts alter trade flows, suggesting a complex relationship between domestic policy, currency strength, and global commodity markets. Investors need to assess these potential outcomes critically, as they will determine market behaviors in the medium to long term.
MacroVoices Erik Townsend & Patrick Ceresna welcome, Chief Market Strategist Michael Every. They discuss why Michael thinks Volatility will be at the centre of the Trump 2.0 Presidency, and that when global leaders start moving lines on maps, we should expect some big moves in the lines on our financial charts. https://bit.ly/40JBhp9
