What investment opportunities did Trump reveal in his latest interview?
At 16:00 Beijing time, Trump once again accepted an exclusive interview with Bloomberg. In the hour-long conversation, he once again mentioned his potential economic policies after taking office, with the top priorities still being tariffs and the Federal Reserve.
In his view, significantly increasing tariffs and establishing more "effective" communication with the Federal Reserve will be his two main levers to reshape the U.S. economy. Although, in theory, a substantial tariff hike would significantly exacerbate the still-high inflation in the U.S. and lead to a further surge in national debt, Trump dismisses these concerns as "nonsense" from economists, insisting that his policies will revitalize the U.S. economy.
First, the conclusion: Given Trump's current stance and the increasingly uncertain international situation, the recommended allocations are domestic policy-driven stocks, long-term U.S. Treasuries, and gold. Large-cap tech stocks are likely to be dragged down by the situation, and with corporate earnings in both China and the U.S. unlikely to significantly exceed market expectations in Q3, it's better to wait and hold—the final outcome won't be bad.
1. On tariffs
"We will bring companies back to our country," Trump said.
Trump believes that high tariffs will have only one outcome: forcing companies that want to avoid tariffs to return to the U.S. to invest and build factories, keeping jobs local. Frankly, Trump's insistence isn't entirely baseless—historically, in several tariff wars initiated by the U.S., the country has emerged as one of the ultimate winners.
However, it's important to note that the U.S.'s share of global manufacturing today is vastly different from its historical position. While tariffs may indeed be an effective way to force companies back to the U.S., whether they can achieve Trump's desired results in practice remains highly uncertain. Yet, as the saying goes, "A lie repeated a thousand times becomes the truth." Trump's repeated public assurances have convinced his followers of this theory.
2. On the Federal Reserve
Another major variable under a Trump administration would be the Federal Reserve. In his view, the U.S. president has too little say over interest rates. Although firing Powell immediately after taking office is unlikely, Trump would use all his influence to increase presidential authority over interest rate policy. Therefore, breaking the norm is almost inevitable—even more so than tariff hikes.
Theoretically, making such an unconventional change within the current U.S. system is far more difficult than imposing tariffs or cutting taxes. However, the Federal Reserve has clearly become the centerpiece of the U.S. and even the global economic stage, and both political parties might welcome a share of that power. Thus, the likelihood of Trump succeeding in this endeavor should not be underestimated.
3. On U.S.-China relations
The role of tariffs in U.S.-China relations under a Trump administration may be widely misunderstood. Here are the key points:
1. Compared to 2018, the inflation situation facing ordinary Americans is entirely different, meaning the public support for imposing additional tariffs on China is also different.
2. Trump wants to push for Russia-Ukraine peace talks after taking office, making China's support crucial. In fact, the tariff issue might just be a smokescreen to gain leverage—Trump himself said in the Bloomberg interview that threatening China with tariffs would benefit negotiations with Russia.
3. One overlooked aspect of Trump's economic framework is his openness to Chinese manufacturing investments in the U.S. This approach was used to ease tensions during U.S.-Japan trade conflicts in the last century. However, this idea isn't mainstream within the Republican Party, which remains largely anti-China, and Chinese regulators are also wary of allowing advanced technologies to go abroad.
4. Finally, uncertainty also comes from China. If we choose a tough stance in response to threats, the relatively moderate scenarios above will vanish, leading to outcomes unfavorable to both sides. All we can do is wait and see. $Hang Seng Index(HSI.HK) $NVIDIA(NVDA.US) $iShares barclays 20+ Yr Treasury Bd(TLT.US)
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