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Sydney Morning Herald
07-05-2025
- Business
- Sydney Morning Herald
Home of global capital? Investors run from Trump's America
The dollar's sensitivity to the trade policies is rational. For most of the past 80 years, the greenback has been central to global trade and financial activity. It has been the world's reserve currency and a key facilitator of the increasing globalisation of trade and finance over that period. Loading The US has benefited from its currency's role, with inflows of foreign capital enabling Americans, including the government, to pay lower interest rates on their debts than might otherwise have been the case. The dollar's status has effectively provided the US with unlimited currency reserves, removed any threat of a balance of payments crisis or a default on its debts, and let America and Americans borrow cheaply and live beyond their means. It has allowed US governments to pile up debt of more than $US36 trillion ($55.4 trillion) – almost 100 per cent of America's GDP – without, until very recently, any of the buyers of that debt questioning its ability to repay it or expand deficits and debt even further. Bessent talked about solidifying America's place as the home of global capital, but that is what it has been for much of the post-war period – until Trump regained office. The Trump administration, by trying to blow up the post-war order and the multilateral institutions that support it with 'America First' policies, is making even its long-term allies (all of them on the receiving end of Trump's tariffs) question whether they can trust America, and whether it's still a safe and attractive place to invest. It hasn't helped that the introduction of Trump's tariffs has been shambolic, with their design changing almost on a weekly basis, with exemptions and pauses when easily foreseeable – but to the administration, unforeseen – unintended consequences emerged. This administration has, thus far, lacked basic competence. Neither does it engender any confidence outside the US that important policies are suddenly sprung on them (and, it seems, the senior members of the Trump administration) via very unpresidential, semi-coherent, posts by Trump on his Truth Social platform at all hours of the day or night. The administration is driving the US economy towards a recession, and policies that are supposed to generate a revival of the manufacturing industry in America are – because US companies have been at the forefront of globalising their supply chains – already causing significant damage to US companies even before they face retaliatory trade barriers elsewhere. That's hardly a recipe for solidifying America's appeal to global capital providers. There's been a lot of discussion about whether China might respond to the 145 per cent tariffs Trump has slapped on its exports (in a fit of pique after China responded to earlier tariffs with tariffs of its own) by dumping the $US760 billion or so of US Treasury bonds that it holds as part of its $US3.2 trillion of US dollar denominated reserves. It won't do that – its losses would be huge if it did – but, since the US-led G7 froze more than $US300 billion of Russia's dollar-denominated reserves after Russia invaded Ukraine, there has been a notable acceleration in the rate at which China has been running those holdings down. China had around $US1 trillion invested in Treasuries before the 2022 invasion. There have been reports from within China that flag a continuation of its strategy of incrementally reducing the exposure to US markets and diversifying its reserves, which would appear the rational course. China has trebled the share of gold in its reserves over the past three years. Japan is the biggest holder of US Treasuries – about $US1.1 trillion of them – and its finance minister, Katsunobu Kato, raised eyebrows recently when he described the holdings as a 'card' to play in trade negotiations with the US. 'It (the bond holdings) does exist as a card,' he said. 'Whether or not we use that card is a different decision.' Days later, he said Japan was not considering the sale of Treasuries as 'a means of Japan-US negotiations.' China and Japan might not dump their US reserves but, with US deficits and debt projected to soar over the next decade – Washington's Committee for a Responsible Federal Budget has said the Republicans' 'big, beautiful' new budget bill now working its way through Congress could add $US5.8 trillion to US deficits over the next decade. The US dollar dominates because there is no rival, very liquid, freely-trading currency backed by the world's deepest financial markets and, until Trump started issuing executive orders that appear illegal and unconstitutional, a trustworthy legal system. Loading China has none of the preconditions for turning its yuan into a reserve currency. It controls the flows of capital, it intervenes in the market for its currency, its financial markets are shallow by comparison with America's, its legal system is opaque, and its economy is intensely regulated and centrally directed. The European Union does have a free-floating currency, trusted legal systems and doesn't control the flows of capital, but it's a collection of individual economies and financial systems and governments that issue their own debt. If there were a single issuer of eurozone debt, backed by the economies of all EU members, it could potentially challenge the US dollar as an alternate reserve currency. Certainly Trump, with his war on global trade and institutions and tariffs on the EU economies, is providing motivation and opportunity. It would, however, take years of economic, financial and regulatory reform for the euro to displace the US dollar and the history of the EU says that it is extraordinarily difficult, indeed near-impossible, to get a consensus for ambitious reforms. Bessent, with a boss who makes up policy on the spot – witness the bizarre announcement of a 100 per cent tariff of movies made outside the US that the administration is now trying to talk down – is doing his best to present the US trade agenda as part of a well-considered grand plan. Most outside Trump's MAGA movement see it as wanton self-destruction that will damage the US economy, undermine the place of the US dollar at the heart of global economic activity and permanently diminish America's role in geopolitics and global trade.
The Age
07-05-2025
- Business
- The Age
Home of global capital? Investors run from Trump's America
The dollar's sensitivity to the trade policies is rational. For most of the past 80 years, the greenback has been central to global trade and financial activity. It has been the world's reserve currency and a key facilitator of the increasing globalisation of trade and finance over that period. Loading The US has benefited from its currency's role, with inflows of foreign capital enabling Americans, including the government, to pay lower interest rates on their debts than might otherwise have been the case. The dollar's status has effectively provided the US with unlimited currency reserves, removed any threat of a balance of payments crisis or a default on its debts, and let America and Americans borrow cheaply and live beyond their means. It has allowed US governments to pile up debt of more than $US36 trillion ($55.4 trillion) – almost 100 per cent of America's GDP – without, until very recently, any of the buyers of that debt questioning its ability to repay it or expand deficits and debt even further. Bessent talked about solidifying America's place as the home of global capital, but that is what it has been for much of the post-war period – until Trump regained office. The Trump administration, by trying to blow up the post-war order and the multilateral institutions that support it with 'America First' policies, is making even its long-term allies (all of them on the receiving end of Trump's tariffs) question whether they can trust America, and whether it's still a safe and attractive place to invest. It hasn't helped that the introduction of Trump's tariffs has been shambolic, with their design changing almost on a weekly basis, with exemptions and pauses when easily foreseeable – but to the administration, unforeseen – unintended consequences emerged. This administration has, thus far, lacked basic competence. Neither does it engender any confidence outside the US that important policies are suddenly sprung on them (and, it seems, the senior members of the Trump administration) via very unpresidential, semi-coherent, posts by Trump on his Truth Social platform at all hours of the day or night. The administration is driving the US economy towards a recession, and policies that are supposed to generate a revival of the manufacturing industry in America are – because US companies have been at the forefront of globalising their supply chains – already causing significant damage to US companies even before they face retaliatory trade barriers elsewhere. That's hardly a recipe for solidifying America's appeal to global capital providers. There's been a lot of discussion about whether China might respond to the 145 per cent tariffs Trump has slapped on its exports (in a fit of pique after China responded to earlier tariffs with tariffs of its own) by dumping the $US760 billion or so of US Treasury bonds that it holds as part of its $US3.2 trillion of US dollar denominated reserves. It won't do that – its losses would be huge if it did – but, since the US-led G7 froze more than $US300 billion of Russia's dollar-denominated reserves after Russia invaded Ukraine, there has been a notable acceleration in the rate at which China has been running those holdings down. China had around $US1 trillion invested in Treasuries before the 2022 invasion. There have been reports from within China that flag a continuation of its strategy of incrementally reducing the exposure to US markets and diversifying its reserves, which would appear the rational course. China has trebled the share of gold in its reserves over the past three years. Japan is the biggest holder of US Treasuries – about $US1.1 trillion of them – and its finance minister, Katsunobu Kato, raised eyebrows recently when he described the holdings as a 'card' to play in trade negotiations with the US. 'It (the bond holdings) does exist as a card,' he said. 'Whether or not we use that card is a different decision.' Days later, he said Japan was not considering the sale of Treasuries as 'a means of Japan-US negotiations.' China and Japan might not dump their US reserves but, with US deficits and debt projected to soar over the next decade – Washington's Committee for a Responsible Federal Budget has said the Republicans' 'big, beautiful' new budget bill now working its way through Congress could add $US5.8 trillion to US deficits over the next decade. The US dollar dominates because there is no rival, very liquid, freely-trading currency backed by the world's deepest financial markets and, until Trump started issuing executive orders that appear illegal and unconstitutional, a trustworthy legal system. Loading China has none of the preconditions for turning its yuan into a reserve currency. It controls the flows of capital, it intervenes in the market for its currency, its financial markets are shallow by comparison with America's, its legal system is opaque, and its economy is intensely regulated and centrally directed. The European Union does have a free-floating currency, trusted legal systems and doesn't control the flows of capital, but it's a collection of individual economies and financial systems and governments that issue their own debt. If there were a single issuer of eurozone debt, backed by the economies of all EU members, it could potentially challenge the US dollar as an alternate reserve currency. Certainly Trump, with his war on global trade and institutions and tariffs on the EU economies, is providing motivation and opportunity. It would, however, take years of economic, financial and regulatory reform for the euro to displace the US dollar and the history of the EU says that it is extraordinarily difficult, indeed near-impossible, to get a consensus for ambitious reforms. Bessent, with a boss who makes up policy on the spot – witness the bizarre announcement of a 100 per cent tariff of movies made outside the US that the administration is now trying to talk down – is doing his best to present the US trade agenda as part of a well-considered grand plan. Most outside Trump's MAGA movement see it as wanton self-destruction that will damage the US economy, undermine the place of the US dollar at the heart of global economic activity and permanently diminish America's role in geopolitics and global trade.
Yahoo
06-05-2025
- Business
- Yahoo
Carney meets Trump, stresses Canada won't be for sale
US President Donald Trump has begun his first talks with Canadian Prime Minister Mark Carney and vowed to bring up "tough points" that are dividing the two countries since Trump imposed tariffs. Their meeting started with smiles and a handshake despite Trump's desire to eradicate the US-Canada border, a prospect that has chilled bilateral relations. The subject quickly came up as they took questions from reporters. "We're not going to be discussing that unless somebody wants to discuss it," Trump said. "It would really be a wonderful marriage." Carney put down the idea firmly. ADVERTISEMENT "It's not for sale, it won't be for sale - ever," he told Trump in the Oval Office. "Never say never, never say never," Trump said. Pres. Trump on Canada becoming 51st state: We're not going to be discussing that, unless somebody wants to discuss really would be a wonderful marriage. Canadian PM Carney: There are some places that are never for not for sale. It won't be for sale, ever. — CSPAN (@cspan) May 6, 2025 Trump, whose tariff policy has rattled world markets, said he and Carney would discuss "tough points," an allusion to the president's belief that the United States can do without Canadian products. "Regardless of anything, we're going to be friends with Canada," he said. ADVERTISEMENT Carney's Liberal Party won the April 28 election on promises to tackle Trump and create a new bilateral economic and security relationship with the United States. Shortly before Carney arrived, Trump posted a message on social media. "I very much want to work with him, but cannot understand one simple TRUTH — Why is America subsidising Canada by $200 Billion Dollars a year, in addition to giving them FREE Military Protection, and many other things? We don't need their Cars, we don't need their Energy, we don't need their Lumber, we don't need ANYTHING they have, other than their friendship, which hopefully we will always maintain. They, on the other hand, need EVERYTHING from us!" Trump appeared to be referring to the trade deficit the US has with Canada due mostly to US imports of Canadian oil, although Canada's merchandise trade surplus was C$102.3 billion ($A115.21 billion) in 2024. Carney, a 60-year-old ex-central banker with no previous political experience, was elected Liberal leader in March to replace Justin Trudeau, who had a poor relationship with Trump. ADVERTISEMENT Canada is the US' second-largest individual trading partner after Mexico, and the largest export market for US goods. More than $US760 billion ($A1.2 trillion) in goods flowed between the two countries last year. .@POTUS: "It's a great honor to have Prime Minister @MarkJCarney with us. As you know, just a few days ago, he won a very big election in Canada." — Rapid Response 47 (@RapidResponse47) May 6, 2025 Ahead of the meeting, the US Commerce Department reported on Tuesday Canada's goods trade surplus with the US narrowed to a five-month low in March, the month when Trump's hefty tariffs on imported steel and aluminium took effect. Canadian exports to the US plunged by $US3.7 billion, the second-largest drop on record. ADVERTISEMENT Canadian data showed the drop in US exports was almost compensated by an increase to the rest of the world, as Canadian companies sought new markets. Trump in March imposed a 25 per cent tariff on all steel and aluminium imports and then slapped another 25 per cent tariff on cars and parts that did not comply with a North American free trade agreement. Trump showered his counterpart with compliments and radiated warmth at the start of the press conference, saying that "Canada chose a very talented person, a very good person". with AP
West Australian
06-05-2025
- Business
- West Australian
Carney meets Trump, stresses Canada won't be for sale
US President Donald Trump has begun his first talks with Canadian Prime Minister Mark Carney and vowed to bring up "tough points" that are dividing the two countries since Trump imposed tariffs. Their meeting started with smiles and a handshake despite Trump's desire to eradicate the US-Canada border, a prospect that has chilled bilateral relations. The subject quickly came up as they took questions from reporters. "We're not going to be discussing that unless somebody wants to discuss it," Trump said. "It would really be a wonderful marriage." Carney put down the idea firmly. "It's not for sale, it won't be for sale - ever," he told Trump in the Oval Office. "Never say never, never say never," Trump said. Trump, whose tariff policy has rattled world markets, said he and Carney would discuss "tough points," an allusion to the president's belief that the United States can do without Canadian products. "Regardless of anything, we're going to be friends with Canada," he said. Carney's Liberal Party won the April 28 election on promises to tackle Trump and create a new bilateral economic and security relationship with the United States. Shortly before Carney arrived, Trump posted a message on social media. "I very much want to work with him, but cannot understand one simple TRUTH — Why is America subsidising Canada by $200 Billion Dollars a year, in addition to giving them FREE Military Protection, and many other things? We don't need their Cars, we don't need their Energy, we don't need their Lumber, we don't need ANYTHING they have, other than their friendship, which hopefully we will always maintain. They, on the other hand, need EVERYTHING from us!" Trump appeared to be referring to the trade deficit the US has with Canada due mostly to US imports of Canadian oil, although Canada's merchandise trade surplus was C$102.3 billion ($A115.21 billion) in 2024. Carney, a 60-year-old ex-central banker with no previous political experience, was elected Liberal leader in March to replace Justin Trudeau, who had a poor relationship with Trump. Canada is the US' second-largest individual trading partner after Mexico, and the largest export market for US goods. More than $US760 billion ($A1.2 trillion) in goods flowed between the two countries last year. Ahead of the meeting, the US Commerce Department reported on Tuesday Canada's goods trade surplus with the US narrowed to a five-month low in March, the month when Trump's hefty tariffs on imported steel and aluminium took effect. Canadian exports to the US plunged by $US3.7 billion, the second-largest drop on record. Canadian data showed the drop in US exports was almost compensated by an increase to the rest of the world, as Canadian companies sought new markets. Trump in March imposed a 25 per cent tariff on all steel and aluminium imports and then slapped another 25 per cent tariff on cars and parts that did not comply with a North American free trade agreement. Trump showered his counterpart with compliments and radiated warmth at the start of the press conference, saying that "Canada chose a very talented person, a very good person". with AP
Perth Now
06-05-2025
- Business
- Perth Now
Carney meets Trump, stresses Canada won't be for sale
US President Donald Trump has begun his first talks with Canadian Prime Minister Mark Carney and vowed to bring up "tough points" that are dividing the two countries since Trump imposed tariffs. Their meeting started with smiles and a handshake despite Trump's desire to eradicate the US-Canada border, a prospect that has chilled bilateral relations. The subject quickly came up as they took questions from reporters. "We're not going to be discussing that unless somebody wants to discuss it," Trump said. "It would really be a wonderful marriage." Carney put down the idea firmly. "It's not for sale, it won't be for sale - ever," he told Trump in the Oval Office. "Never say never, never say never," Trump said. Pres. Trump on Canada becoming 51st state: We're not going to be discussing that, unless somebody wants to discuss really would be a wonderful PM Carney: There are some places that are never for not for sale. It won't be for sale, ever. CSPAN (@cspan) May 6, 2025 Trump, whose tariff policy has rattled world markets, said he and Carney would discuss "tough points," an allusion to the president's belief that the United States can do without Canadian products. "Regardless of anything, we're going to be friends with Canada," he said. Carney's Liberal Party won the April 28 election on promises to tackle Trump and create a new bilateral economic and security relationship with the United States. Shortly before Carney arrived, Trump posted a message on social media. "I very much want to work with him, but cannot understand one simple TRUTH — Why is America subsidising Canada by $200 Billion Dollars a year, in addition to giving them FREE Military Protection, and many other things? We don't need their Cars, we don't need their Energy, we don't need their Lumber, we don't need ANYTHING they have, other than their friendship, which hopefully we will always maintain. They, on the other hand, need EVERYTHING from us!" Trump appeared to be referring to the trade deficit the US has with Canada due mostly to US imports of Canadian oil, although Canada's merchandise trade surplus was C$102.3 billion ($A115.21 billion) in 2024. Carney, a 60-year-old ex-central banker with no previous political experience, was elected Liberal leader in March to replace Justin Trudeau, who had a poor relationship with Trump. Canada is the US' second-largest individual trading partner after Mexico, and the largest export market for US goods. More than $US760 billion ($A1.2 trillion) in goods flowed between the two countries last year. .@POTUS: "It's a great honor to have Prime Minister @MarkJCarney with us. As you know, just a few days ago, he won a very big election in Canada." Rapid Response 47 (@RapidResponse47) May 6, 2025 Ahead of the meeting, the US Commerce Department reported on Tuesday Canada's goods trade surplus with the US narrowed to a five-month low in March, the month when Trump's hefty tariffs on imported steel and aluminium took effect. Canadian exports to the US plunged by $US3.7 billion, the second-largest drop on record. Canadian data showed the drop in US exports was almost compensated by an increase to the rest of the world, as Canadian companies sought new markets. Trump in March imposed a 25 per cent tariff on all steel and aluminium imports and then slapped another 25 per cent tariff on cars and parts that did not comply with a North American free trade agreement. Trump showered his counterpart with compliments and radiated warmth at the start of the press conference, saying that "Canada chose a very talented person, a very good person". with AP
