The takeaway
The markets and the general public are sliding down the rabbit hole of bewilderment as President Trump’s “will I tariff or will I not” approach to America’s trading partners have introduced more uncertainty to US investors. In some ways, this is the fault of investors themselves.
I shed no tears for investors who fell for the hype that a Trump election would lead to some near immediate increase in their portfolios. A lot of the hype was based on the President’s pro America and pro market rhetoric particularly during the 2024 presidential campaign. I do not believe the President was being disingenuous. Politics is about persuasion and Mr. Trump, like any good candidate who can read a room, painted a picture of an American golden age that translated into more jobs, increased capital gains, and greater stock and bond residuals.
What American voters and investors failed to do was connect the dots between what a president can actually do for an economy with their expectations as to what he can do for an economy. Regarding Mr. Trump, traders and investors failed to account for Mr. Trump’s pro-nationalist versus globalist stance. They may have over-emphasized Mr. Trump’s alleged negotiation style, where he blusters and says off-balanced things only to dial back and return with a real offer, versus taking his “America First” approach literally. It is more and more apparent that Mr. Trump’s nationalist approach means getting the global balance of payments scheme more aligned with American interests and that means hitting allies and enemies alike with tariffs.
Mr. Trump appears to have learned after his first go-round as president that he can be unilateral in his approach to governance or at least push the envelope a little more when exercising the powers of the Executive Branch. So far, his foreign policy approaches are not reliant on the approval of Congress. He can act exclusively within the powers granted to him by the Constitution as commander-in-chief when dealing with Ukraine and Russia, for example. Also, under the authorizations bestowed on him by Congress in America’s tariff statutes and international agreements, he can on his own enact or delay the tariffs imposed on Canada, China, and Mexico.
Mr. Trump may be seeing a world that is less enthralled with the United States and instead of forcing the US on the world, he would rather see the US shore up its strength within the region of the most influence, the western hemisphere, while reducing the costs of carrying Europe. He can do this by being muscular within the Executive power. He is demonstrating that he has a lot of extra room to flex.
Alton Drew
12 March 2025
What I am reading
Africa. Foreign Exchange. “A pan-African payments infrastructure provider designed to facilitate trade on the continent is piloting an African currency market platform to boost commerce across borders in the region, its chief executive said.
The Pan-African Payments and Settlement System (PAPSS), backed by 15 central banks on the continent, expects to add the platform later this year to complement its payments infrastructure that it says is currently integrated with 150 commercial banks.” Continue reading at Reuters.
British pound. “Sterling steadied against the dollar on Wednesday, holding below four-month highs hit in the previous session, as Britain held back from retaliating against U.S. tariffs on steel and aluminium imports, avoiding tit-for-tat moves.” — Continue reading at Reuters.
US dollar. European Union. Tariffs. “The dollar struggled to lift off a five-month low against major peers on Wednesday, as traders digested tit-for-tat U.S.-EU tariffs and a potential Russia-Ukraine ceasefire, while awaiting U.S. inflation data amid worries about the economy.
President Donald Trump’s unpredictable announcements on trade policy have whipsawed markets and drawn tariff retaliation from trading partners, ramping up a global trade war.” — Continue reading at Reuters.
US. Trump tariff policies. “The bond market is confused over what to make of President Donald Trump’s quickly shifting trade policies.
When tariffs seem in full swing, investors in the bond market worry the economy will slump, and the Federal Reserve may need to cut interest rates. When Trump backs off his more aggressive policies, expectations of rate cuts from the Federal Reserve fade away.” — Continue reading at Investopedia.
The Data
Administered rates per the Board of Governors of the Federal Reserve System.
Discount Window: 4.50%
Effective Federal Funds Rate: 4.33%
Interest on Reserve Balances: 4.40%
Overnight Reverse Repurchase Facility Rate:4.25%
Reference Rates per the Federal Reserve Bank of New York.
Effective Federal Funds Rate:4.33%
Overnight Bank Funding Rate: 4.33%
Secured Overnight Financing Rate:4.33%
Broad General Collateral Rate:4.32%
Tri-Party General Collateral Rate:4.32%
Foreign exchange rates per the Board of Governors of the Federal Reserve System.
EUR/USD=1.0859
USD/JPY=147.1300
U.S. Treasury rates
2-yr notes: 3.94%
10-yr notes: 4.28%
30-yr bonds: 4.59%
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