Trump’s trade protectionism will eventually prove a loss-loss game

In the first stage, you believe this can work and that you will reap many benefits from putting the pressure on your business partners, however in a second stage, you realize that you have gravely damaged confidence and future growth opportunities with the same business partners.

This two-stage process sums up what a number of business leaders have explained in recent weeks as US President Donald Trump has strengthened his “America First” trade policy, notably deciding new tariffs for Chinese imports worth hundreds of billions in US dollars (USD).

On the one hand, people close to the Trump administration emphasized POTUS “hard approach” is a means of negotiation with a view to reaching a better balance for US trade; on the other hand, some business people and experts stressed on the fact that China has shown no sign of yielding to Trump’s pressure and that such a resilience could start a negative chain reaction for the global economy and thus for the US economy too.

Donald Trump’s policy is also to said be shortsighted as China will become more and more powerful in the future and more capable of crafting new ways of neutralizing US economic clout for instance by developing deeper, larger trade relations with Europe.

The Dollar (USD) at the heart of stock market and Trump’s near future

The S&P-500 index reached a new record high on August 21, 2018 at 2,862.96 points after equaling its longest historical uptrend.

While the bullish cycle of US stock markets – and more generally European markets, apart from the sovereign debt crisis in 2011 – is now as long as that observed from November 1990 to March 2000 with 3,452 days, the continuation of such a long-term trend will depend more than ever on the dollar (USD) and the policy of the US Federal Reserve (Fed).

Like President Donald Trump, some investors are worried about a further weakening of the dollar following the policy of interest rate hikes planned by the Fed. Confident in the economy and given the rising inflation in the United States as in most developed countries, the Fed should not significantly change its objectives.

In Washington DC, the Trump administration seems eager to avoid any bump, even minimal, on that long road of good figures for stock markets and economic growth before the mid-term elections scheduled for November.