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Claus Vistesen profile picture
Claus Vistesen

Markets were mulling familiar themes last week. Will a wider U.S. twin deficit change the rules for the dollar and treasuries and is elevated volatility here to stay in equities? Judging by last week, the answer would be: probably and yes.

The contemplation over these stories, though, were interrupted by politics. Mr. Trump announced his intention to apply tariffs on steel and aluminium—25% and 10% respectively—and Mrs. May attempted to give clarity on the U.K. government’s Brexit position.* I was unimpressed with both.

Before I have a dig at Mr. Trump, I ought to provide an example of someone who supports it. I have great respect for Stephen Jen, but his argument here is like endorsing the idea of a diet by advising someone to eat nothing but kale and carrots for a decade. The analysis of Mr. Trump’s tariffs requires a distinction between the principle and the concrete measures.

I concede that China is bending the rules of global trade, but Mr. Trump is stretching the fabrics of macroeconomic policy if he starts imposing tariffs on industrial goods. He is presiding over an economy close to full employment, a low domestic savings rate, and a medium-sized twin deficit. To boot, he is about to let fly with unprecedented fiscal stimulus.


This article was written by

Claus Vistesen profile picture
Claus Vistesen is a Danish economist who specialises in macroeconomics. He holds a postgraduate degree in Economics. His primary research interests include demographics, macroeconomics and international finance which he practices as Chief Eurozone Economist for Pantheon Macroeconomics. His contributions at Seeking Alpha represent his views alone, and have nothing to do with his employer. He can be contacted through his e-mail (clausvistesen@gmail.com) or through his website (clausvistesen.com) where you can also find most of his writing. He enjoys the interaction with Seeking Alpha readership a lot and will try to reply to all of the comments you throw his way.

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