The president’s posturing, bullying and sharp business practice is leading the US economy to the rocks
It is galling to watch President Trump’s vain posturing as he parades around the world.
His tax cuts have been a good thing for the stockmarket, although they are now wholly reflected in prices. The improbable device of soaking the rich with even more wealth will almost certainly spur economic growth, perhaps by as much as 0.7 per cent this year and a further 1.5 per cent the following, according to The Economist.
But it comes at a monstrous cost to the government deficit, which will hit nearly six per cent by 2020.
Through modern history, the deficit has never been greater outside a time of crisis. This leaves the economy in an appallingly vulnerable position and the government’s finances at risk of spiralling out of control if something untoward were to occur.
Trump has now begun to hike tariffs. His initial salvo targeted washing machines (no, really) and moved on to slapping 25 per cent on imports of steel, and 10 per cent on aluminium. The Chinese have responded with a proposal of their own matching the new US tariffs dollar for dollar.
Playing a game of chicken with autocratic nations who only have a passing interest in the well-being of their people is a dangerous approach for a democratically-elected President. Yes, it has played well with Trump’s core blue-collar supporters, but the economics profession has come out in a rare show of unity decrying the move.
Turnover among White House staffers is at unprecedented levels. Worryingly, the widely admired chief economic adviser Gary Cohn has resigned in protest over the tariffs. He joins the growing diaspora of ex-staffers. The arrival of a retread neo-con like new national security adviser John Bolton only adds to concerns.
Markets took comfort from Trump’s election promise to fill his staff with the most able lieutenants. Presumably, this means the replacements are second best, having been overlooked in the first round. Given Trump’s record on hanging on to staff, the third rankers should be readying their CVs.
I was tempted to read the President’s 1987 book, The Art Of The Deal, to get a more informed view of his approach. However, a little research reveals he only seems to have had a limited role in authoring it.
His ghost writer apparently wants nothing further to do with the man, while the head of the book’s publisher Random House is quoted as saying: “Trump didn’t write a postcard for us.”
Trump has responded to criticism from his ghost writer with threats of legal action.
Separating fact from fiction in such a politically charged Washington/New York individual is difficult. His bullying nature and rumours of sharp business practice combined with a vain charismatic public persona reminds me of media mogul, Robert Maxwell.
Trump has never been convicted of any crime but he keeps his lawyers dizzyingly busy in the civil courts. I think that rather than reading The Art Of The Deal, I shall spend my time re-visiting the Victorian era exploits of Augustus Melmotte in Anthony Trollope’s The Way We Live Now.
Trump entered the White House as a maverick promising to “drain the swamp”. He appears to relish chaos around him and has no qualms in creating conflict. Markets have benefited from his tax cuts but his unorthodox trade policies come with heavy risks.
It seems difficult to believe that Chinese tariffs can be reduced by ratcheting up US tariffs but Trump considers himself a genius. Perhaps the man’s elevated intelligence is such that it defies traditional logical analysis.
We must be ready to bet against it in the expectation the US economy may be heading for the rocks.
Jason Broomer is head of investment at Square Mile Investment