If you’ve been reading these pages in recent months, you may have noticed a trend. I have been trying to put U.S. President’s Trump’s impact on the global economy in perspective, in part by stating that it’s not as bad as some have made it out to be, and, lo and behold, guess what? Things haven’t turned out as bad as they’ve been made to be, have they.
For instance, let’s take the most recent development: the renegotiation of Nafta, the North American Free Trade Agreement. Now, there has been a lot of grumbling about Trump’s tactics on trade and tariffs. There’s no doubt about that. But let’s take a look at what actually happened.
The art of the deal
After a lot of fear, and maybe even some hysteria, a new free-trade deal has been agreed to by the United States, Mexico and Canada. And, in typical Trump fashion, there was a lot of bluster on his part, even threatening to level huge tariffs on Canada’s auto exports to the United States. But, in the end, what came of it all? Both Mexico and Canada gave some concessions to Trump, in exchange for a new free-trade agreement, now called the USMCA (United States Mexico Canada Agreement). And now everyone’s happy. Imagine that.
Trump is now set to engage in similar tactics with China; this as he’s already come to an understanding on trade with Europe, and even Germany, led by Chancellor Angela Merkel, has now reached out to Trump on the issue of gas imports from Russia. When Trump first raised the issue, there was an awful lot of backlash. Now, there’s actually some discussion. Imagine that.
A method to the madness
Part of the point here is that President Trump, regardless of what you think of him and his style, isn’t simply shooting from the hip. There is a method to his madness, which, for economic observers and investors, means that we shouldn’t panic at every news story that comes out about Trump. That, in fact, there are philosophical and historical factors underlying Trump’s approach to the world.
Specifically, the Cold War has been over for a few decades now, which means that a global realignment is underway, regardless of who is President of the United States. During the Cold War, the States was willing to essentially play nice to many crucial allies in exchange for resisting the Soviet Union’s global ambitions. Well, that bill is way past due. American can no longer afford to subsidize its allies, nor does it have to. It’s a new world, and Trump is reflecting some of that new reality.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.