By Michael Every of Rabobank
Welcome to ‘In Deepest Everything’.
Heathrow airport had to shut down because of a single point of failure fire in an electricity substation. If you think that’s the only major G7 infrastructure held together by string at a time when serious people are talking about war and sabotage, I have a bridge we don’t have –and need– to sell you: DM = EM. Also, as a report says everyone in the UK will be worse off by 2030, as the government now plans huge spending cuts to try to balance the budget as growth stalls. And as PM Starmer prepares another attempt to get a Coalition of the Willing together in Ukraine, a former speech-writer for Japanese PM Abe floats his country buying one of the UK aircraft carriers they can’t afford to keep at sea.
There are more Trump tariff rumors just over a week out from April 2 “Liberation Day”. It seems sectoral and reciprocal ones won’t stack, and as already stated, reciprocal won’t be high for everyone – just those running large bilateral U.S. trade surpluses, where the market impact will be largest. But it’s all still very fluid. Indeed, Trump also reportedly floated the idea of the US becoming an associate member of the Commonwealth if King Charles asks. That’s certainly a potential bridging device to get the Anglosphere into one economic entity, as Nouriel Roubini backs the US, Canada, and Mexico embracing an economic union (add a common external tariff vs China and you aren’t far off).
The White House has revoked the legal status of 530,000 Cubans, Haitians, Nicaraguans, and Venezuelans, who must now all self-deport; as it also sold 1,000 Gold Card visas priced $5m each in one day, according to Commerce Secretary Lutnick.
Trump family members are planning a trip to Greenland, and some Danes call for them to be barred, as VP Vance says, “Denmark, which controls Greenland, is not doing its job, it’s not being a good ally. If that means that we need to take more territorial interests in Greenland, that is what President Trump is going to do. Because he doesn’t care about what the European scream at us.”
Trump also launched the Boeing F-47 6G fighter jet, and says many allies want to buy it – but ‘will get a version around 10% worse than the U.S. one, because maybe they won’t always be allies’. Which is long-run US policy – you just don’t say it aloud. And that’s as US Secretary of Defence Hegseth ran a poll on renaming the Department of Defense to the “Department of War”.
Useful, perhaps, as following bellicose comments from Iran’s supreme leader, the US orders a second carrier strike group to the Middle East from Asia, and Iran reportedly militarizes parts of the Strait of Hormuz – a gun-to-own-head threat that could disrupt global energy markets hugely, via higher insurance premiums even before any firing starts. The US is also now insisting on a full Iranian dismantlement of its nuclear program, not just scaling back of uranium enrichment; as Iran and Russia cooperate on producing electronics. How’s that Noxin strategy going?
Nearby, the UAE joins Saudi with a pledge of $1.4 trillion multi-year investment in the US, as both Israel and Turkey enter political crises, the latter banning sort selling, and local sources in the former saying “friction” with Turkey is now inevitable in Syria.
China is floating itself as a Ukraine peacekeeper, which could force Europe into some uncomfortable choices. And underlining how talk is cheap and fast rearmament isn’t, Sweden —one of Europe’s more credible military forces— sees its planned 2028 timeline for two new submarines, which had already incurred a five year delay, slip to “later than 2031”. Add a more bellicose US to the mix and see what the timeline slips to; as France will consider the economic ‘nuclear option’ vs the US, the EU Anti-Coercion Instrument. If that were to happen, it would have an explosive impact on US-EU relations and on markets; as it also foils an Islamist terror attacking set to use explosive drones.
Some European central bank officials reportedly worry they can no longer rely on Fed swap lines in a crisis. Or rather, they can probably no longer rely on *apolitical* swap lines. There will be a quid pro quo for the dollars pro quids & euros. Those who don’t understand how reliant Europe is on these facilities, even if rarely used, will shrug. Those who get the geopolitical reality will duck and cover.
The WSJ claims China is considering taking a page out of Japan’s old playbook with voluntary export restraints, compensated for by price hikes on what it can sell. Which would be inflationary abroad and deflationary for much of China, and which saw Japan blow a property bubble to compensate – China already got there, and reversed course. China also says it’s prepared for “external impacts that may exceed expectations” and will open up more sectors of the economy to international investors; as it also reveals a new deep sea cable cutting device that could threaten global communications.
The FT notices “ships are the new chips”, amid warnings of a “trade apocalypse” as the USTR holds public sessions today over proposed port fees for Chinese-built and operated ships in fleets of those who make calls in the U.S., and on export quotas for U.S. exports on U.S.-flagged, crewed, and —soon— built ships. See In Deepest Ship for more, and note this would both hit short-haul traffic the hardest, and imply ships will make fewer port calls, bringing us back to ‘To Big to Sail’ logistical crunches we described back in 2021 as presaging a spike in inflation.
The also FT worries the US is losing its “exceptionalism”, as stocks and the dollar fall in tandem. Have they seen what some big EM are doing – like Indonesia, Turkey, and India?
And Bloomberg says, “Don’t fight the Treasury” is the new mantra for some. You mean the Fed is less relevant in a geopolitical world? You mean there might be a correlation between a US admin embracing radical economic statecraft and the key market pivot point they openly say they are now focused on? “I’m shocked, shocked there is gambling going on in here.”
Any one of these stories above could fill a Daily or a Weekly or a Monthly given the market implications: and now we get a full daily with just the barest reference to each of them.
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