Has Donald Trump gone mad?

Thursday, 8th March 2018 09:32 - by Ranjeet Singh

As most people around the world I have been quietly increasing my stock of food and water supplies whilst digging a bunker at the bottom of my garden, just in case Donald Trump decides to set the world on fire. Not long ago he was teasing Kim Jong-un to press the red nuclear button but thankfully the Winter Olympics held in South Korea a few weeks ago offered us all a much-needed reprieve as ‘Toddler Trump’ became distracted.

Then when the North and South Koreans ignored him in their sporting solidarity, Trump turned his attention towards seeing whether he could stoke the fire with the Russians. As America’s longest and most decorative arch old enemy, the Russians are never far from Trump’s imagination and since his inauguration in January 2017, they have been involved in one way or another.

However, it would be very useful for us all if Trump’s trusted advisors could remind him that if there is one country in the world that he is best not to play Russian Roulette with, it’s Russia. After all they invented the game.

To be honest I’m only making fun of Trump because he’s easy to make fun of. I think that despite his obvious eccentricities and the fact that he may be a complete lunatic, he is also a breath of fresh air in many ways. For a start he’s not a part of the old school establishment. Of course, I may not agree with every policy, in fact I don’t agree with many of his policies but that’s not to take away anything from the man who does what he believes in and who built up a multi-billion-pound empire, albeit not without a little help from daddy.

However, I do think that his recent decision to introduce a 25% tax on steel imports and a 10% tax on aluminium imports is probably not one of his better ones. Also, his justification for such a radical border tax which he said was necessary for the US to tackle America’s $800 billion trade deficit, is flawed. For a start the steel industry that he is so desperate to protect is a small fraction of the total goods and services that the US exports. But that of course won’t stop people from being scared with how China might react.

Ironically the US only import something like $100m of steel from China which may make you wonder what all the fuss is about?

Well it’s because of what happens after this move. The Chinese won’t take this sitting still and are almost certain to retaliate with their own import taxes and neither will the Europeans, the Canadians, the Brazilians, the Mexicans or the South Koreans. Each of these countries actually export more steel to the US than the Chinese.

However, China is the 2^nd largest economy in the world and between China and the US is a whopping $600 billion amount of trade on the table and that’s why investors are right to be concerned. If this taxation really comes through we could easily see a global trade war and harsh protectionist policies which will really dampen equity markets particularly.

My view on why this is all happening is more to do with politics rather than economic. Trump is a master of political persuasion and his vote bank of the 150,000 steel and aluminium mill workers in the US will be sure to vote for him at the next elections. However, on this occasion I think the move was short-sighted and too aggressive – it could even be the straw that breaks the president’s back – although I have a feeling he will find a way out as he always seems to do. Let’s see.

Whatever happens there will be fireworks in 2018 for sure.

To watch my short video on this just copy this URL https://youtu.be/B9D0a921CqA

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.