By Michael Every of Rabobank
April Fools
Spot the April Fools’ Day jokes among the following recent headlines:
The Daily Mail says Trump could technically be President for a further two terms using a loophole Eisenhower considered, running as Vice President to a presidential candidate who resigns after they are sworn into office: then Trump alluded to that possibility.
The Financial Times’ chief foreign affairs commentator Gideon Rachman therefore recommends Americans “embrace and push forward” AOC and Bernie Saunders as a defence against a slide into authoritarianism, a-la “Russia, Turkey, and India.”
The Washington Post says a Department of Defence memo declares China the strategic focus, along with preventing the capture of Taiwan: Russia, Iran, North Korea, and terrorism are all secondary. Further, the US must now guarantee control over the Panama Canal and ensure a military presence in the “near abroad” –a Russian term– of Greenland and Panama, the former of which Trump refuses to rule out the use of military force to obtain.
Worse, the memo says the US cannot fight on two fronts, so Europe must fight Russia itself. That’s as Moscow signed up another 160,000 conscripts, saying they won’t be sent to Ukraine, and Europe only did the latter; and Germany’s intel service reports Russia is most likely preparing for a “large-scale conventional war” with NATO by the end of the decade.
British Steel shut down its Scunthorpe plant after 150 years just as the UK aims to rearm. The government says it had “productive negotiations” with the US on an “economic prosperity deal” –not “co-prosperity”?– as reports say London will buy F-35 fighter jets rather than Eurofighters; yet the UK was also just told “no free trade without free speech” by the US.
Finland’s President dropped in to play golf at Mar-a-Lago and emerged with a deal, Trump saying: “President Stubb and I look forward to strengthening the partnership between the US and Finland. That includes the purchase and development of a large number of badly needed icebreakers for the US.”
Then again, the leading 2027 French presidential candidate, the National Rally’s Le Pen, has just been banned from running for office for five years and sentenced to four years for embezzlement. The same accusation had already circled the French Prime Minister, who wasn’t charged, and Le Pen called it a political attack and appealed, as populists, including Trump, rally round her. Moreover, El Pais reports the EU is considering using their Anti-Coercion Instrument on the US as a response to tariffs, which would be economically escalatory – and geopolitically naïve.
Slovakia’s populist Prime Minister Fico claims European Commission President Von der Leyen called him “a complete idiot” for half an hour in a phone call over his attempt to negotiate lower tariffs with the US directly.
Trump is “p***ed off” at Russia’s Putin and may put 25-50% secondary tariffs on Russian oil if he doesn’t play ball on Ukraine peace, as with/double Venezuela. The implications for the oil market are enormous – Brent is just shy of $75, which is surely not what ‘no Russian oil’ implies(?)
An IDF source says a clash with Iran is “inevitable”, and some muse on the same vis Israel-Turkey. Iran’s president rejected direct negotiations with the US, to which Trump replied: “If they don’t make a deal, there will be bombing – and it will be bombing the likes of which they have never seen before.” Iran then warned it will strike the Diego Garcia base if the US uses it to attack it –quite the logistical feat!- as a new airstrip appeared next to the Bab-el-Mandeb maritime chokepoint – a likely UAE contribution.
Trump’s first foreign visit as president will, again, be to Saudi in May, showing big changes may loom. That’s as Israel steels its border with Jordan and, with the unconditional backing of the US, demanded Egypt dismantle its growing military presence in the Sinai Peninsula. Moreover, as Israel’s PM Netanyahu was called out of one of his now-regular court corruption trial sessions for a police interview after two of his aides were arrested for receiving funds from Qatar.
US Secretary of Defence Hegseth just ramped up arms and promises to the Philippines and Japan, and claimed the latter shares a “warrior ethos”. Then China, Japan, and South Korea pledged deepened regional trade relations and, said Chinese media, a joint response to US tariffs, as well as an attempt to denuclearise North Korea.
China passed a law saying if it’s sanctioned by another state, it can legally expropriate that country’s firms’ IP or assets, just as it stressed how open to global businesses it is again.
Canada’s caretaker PM Carney proposed pivoting from “because markets” on housing to post-WW2 state interventionism. There’s a lot of that about, and markets clearly don’t like it.
The EU is reportedly exploring a weaker 2040 climate goal, keeping a 90% emissions-cutting target but changing how countries calculate their progress – either less now, more later; or letting other countries do it for them and buying carbon credits.
The US Trade Representative released a 397-page report detailing other economies’ non-tariff barriers ahead of tomorrow’s ‘Liberation Day’, which cover just about everything imaginable. That’s as The Wall Street Journal says, ‘The Era of Cheap Stuff Was Already Ending. Now Comes the Tariff Threat,’ and Bloomberg adds Trump tariffs “pose a generational challenge to Asian economies built around exports to the US and low trade barriers.”
Yet an FT op-ed yesterday argued ‘Globalisation will triumph over Donald Trump’, quoting those saying even if the US stops buying everything from everyone, within a year, 70 of its trading partners would have redirected all their exports to others, and within five years, 115 would have. To whom? Priced and cleared in which currency? And, if so, why are worrying about tariffs at all?
The market continues to ponder ‘dedollarisation’: in which case nobody is net exporting to the US or has future access to enough dollars to repay their outstanding Eurodollar debts, let alone import bills priced in it, so the global financial system crumbles – and I don’t mean a ‘correction’.
As @balajis puts it: “No reindustrialisation without dedollarisation. But dedollarisation means imperial collapse. On the other hand, so does deindustrialisation! This is the fundamental paradox.” It has been for some time if you looked at the world with the right lenses, and they also show everything is now about US Grand Macro Strategy, not macrostrategy, to try to square the above circle by whatever means necessary: if lines on maps can move, so will lines on screens.
As two Fed speakers (Williams and Barkin) just said they don’t know where monetary policy needs to be ahead, and that the risk is of higher inflation ahead from tariffs despite matching uncertainty, @daniel_mcdowell puts it: “We’re living through a natural experiment. Can economic and monetary orders built atop particular political orders survive when the latter are dismantled? Markets may very well be grossly underestimating the kind of economic changes heading our way if we continue on this course.”
So, how many April Fools were there today? None. Unless you aren’t looking at any of the above news – then there’s at least one.
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