Over the ten or so years that i've been trading Forex, position trading has been one of my favorite styles and best money makers. Position trading, for me at least, involves forming a world view based on the economic data releases like GDP, trade balance, CPI and PPI, followed by looking for confirming technical levels, and then buying or selling when we hit Support / Resistance.
Of course the underlying assumption is that every country is acting in it's own self interests. That means they want a higher GDP, more exports than imports and a comfortable level of inflation. Which is why Trump is so frustrating. His policies are out of Bizarro land - potentially leading to higher deficits, runaway inflation and a questionable effect on the trade balance.
Let's just look at the latest example of his tweets on potential tariffs on steel and aluminum. The USD had been recovering somewhat from the crappy tax plan announced in November/December when Trump decided to go unhinged again and talk about putting a 25% tariff on imported steel. What happens? USD and CAD take another tumble again. The CAD is close to all-time lows against the EUR, CHF and AUD.
And then he tops it off with a tweet about how easy trade wars are to win. Maybe he should look into what happened the USA tried to pull a stunt like this, back in 2002. Bush's steel tariffs were met with retaliatory tariffs on products in key swing states like Florida oranges and Detroit made cars. Within a year, USA's steel tariffs came back down.
Don't just take my word for it. According to economist Adam Posen, the tariffs mess up the entire trading system for many industries just to protect the steel industry, which has about 140,000 jobs (at 2015) and contributes only $36 billion to the US economy. On the other hand, the steel consuming industries which will be affected by these tariff employ 6.5 million people and contribute $1 trillion dollars to the US economy. Sounds like a good trade, eh?
Ordinary folks are going to lose. Cars become more expensive, beer becomes more expensive because of the cans, your Kentucky bourbon becomes more expensive. Who wins? The ones who are able to take advantage of the fact that they know Trump's about to tweet something crazy. Like this former Trump adviser. So much for draining the swamp.
