You see, the world isn’t falling apart after all

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

United States Mexico Canada Agreement free trade

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.


Removing emotion from economic analysis

If you were to read much of the global economic press today, there would be a common thread: Although the global economy is chugging along quite nicely, especially in the United States, pessimism is warranted, in large part because of tariffs and the threat of trade wars.

However, if you have read these pages (as well as our new commentary section), you would know that news headlines, especially as they relate to economic and investment news, have to be taken with a grain of salt. Why is that? Well, there’s an old expression regarding journalism: If it bleeds, it leads. Of course, that means that bad news often makes the headlines, and that’s because bad news is considered to attract more attention.

Remember the “housing bubble?”

investment facts versus fiction

There’s perhaps no better example of this phenomenon in Canada than news about Canada’s housing and construction sectors. For the better part of this last decade, there has been constant speculation about an upcoming bursting of the “housing bubble.” But, has it happened yet? No. There’s another factor to keep in mind: it’s human nature. People can sometimes be pessimistic, and that includes not only economic journalists, but economic and investing experts, too.

So, let’s take a closer look at today’s global economy. On the U.S. front, almost all economic numbers are at historic highs: the stock market, the jobs markets — including for minorities — as well as economic outlook, which has been high virtually the moment President Trump came into office. An agenda of low taxes and deregulation, which Trump has since initiated, can do that.

Real-world events set the agenda

As for tariffs and trade wars, just yesterday the United States and Mexico reached a bilateral agreement to revise NAFTA, which takes off the table one of the greatest uncertainties related to Trump’s strategy on tariffs and trade wars. And, although Canada has been left out of these current talks, Trump’s threat of tariffs on Canada’s auto industry might make Prime Minister Trudeau eager to reach some kind of a deal, as many of Trump’s strong initial positions have done in the past.

So, again, if there is a lesson in all of this, it’s to always read negative economic headlines with some caution. Just as it’s the business of the press to attract as many readers as possible, it’s the job of those of us in the investment sector to provide sober second thought and separate emotion from some of the underlying realities.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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