/ DONALD TRUMP / any case . “ For example , will he really enforce elevated tariffs for Mexico and China ? He says he would declare China a currency manipulator on his first day in office . But the Department of State says it does not meet the criteria .”
“ When he trailed the idea of a 5 per cent tariff on imports , there was a large reaction against that . It would be a very difficult thing to do and my view is that he will try to have a few headline-grabbing initiatives .”
A SPECTACULAR OWN GOAL If he succeeds , it could be a spectacular own-goal , argues Keith Wade , chief economist at Schroders : “ He has talked about tearing up the NAFTA agreement . From an economic point of view , that is not really very helpful because it will slow down global growth even more and , by putting tariffs on goods , you ’ ll push up inflation in the US .”
“ Then we ’ ll see a retaliation from other countries – they ’ ll put tariffs on the US , and that ’ s what we call a trade war . That ’ s not very good for global growth .”
In the end , who benefits ? While the US markets have done well following Trump ’ s election , Jane notes that Japanese and
European ones have done better . This is partly a reflection of the improvement in global growth prospects , but also a side effect of the stronger dollar , as European and Japanese manufacturers look more competitive . “ This is going to be a very pro-business , pro-America , pro-jobs and proinflation environment ,” added Jane . “ It is a time to sell bonds and buy equities .”
Even if global economic growth doesn ’ t surge , the pro-bond , prodefensive equity trade has a long way to unwind . Richard Buxton , chief executive at Old Mutual Global Investors , says : “ Trump offers a different policy mix . The fears of deflation are over and now people will start worrying more about inflation . This is the end of the bond bull market as rates start to rise . However , there is still a wall of money that has to change its mind .”
In other words , Trump doesn ’ t have to deliver on a whole lot of his promises for the reflation trade to be sustained . In practice , much of his campaign rhetoric may simply turn out to be negotiating tactics , an extreme starting point to disarm his opponents . It has brought him this far .•
PERFORMANCE OF INDICES SINCE 8 NOV
30 % 25 %
S & P 500 Banks ( Industry ) ( 23.63 %) S & P 500 ( 5.28 %)
20 % 15 % 10 % 5 % 0 % -5 %
08 Nov 10 14 16 18 22 24 28 30
02 Dec 06 08 12 14 16 20 22 26 28 30
Source : FE Analytics
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