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"America First" makes first appearance at Davos

By Patrick Higgins  |  24/01/2018 16:09
”TrumpDavos”/
This article considers the Trump administration's approach to trade and its implications for the dollar

American delegation jumps straight into the fray
 
The American delegation came out guns blazing upon their arrival to the World Economic Forum in Davos today, aiming to demonstrate to the world continued US political and economic might.
 
Treasury Secretary Steve Mnuchin, who amongst the ten Cabinet members travelling to Davos could be considered the most preeminent, spoke out to the forum in complete support for President Trump's, "America First," policies, citing their usefulness in returning economic prosperity to disenfranchised American workers and businesses from abroad. 
 
Weak dollar: new American standard?
 
Additionally, in a shocking shift of policy, Mr Mnuchin spoke out in favour of a weakened dollar, stating that it was the view of the current administration that a prolonged weaker dollar would benefit American exports and trade opportunities; which is overall a key goal of President Trump's tenure.  Furthermore, Mr Mnuchin expressed his absolute conviction that the fluidity of the dollar's value was of no concern to the current government nor foreign investors, and highlighted the dollar's unfaltering relevancy by mentioning the dollar's continued use as the world's primary reserve currency.
 
America First versus Globalisation
 
Secretary Mnuchin's stark words signal to the world that the US is in favour of depressing their currency to secure a more beneficial economic position towards increased levels of exporting, something that recent US administrations never espoused nor supported.  These shifts in policy are again in-line with Trump's protectionist, "America First," mantra.  Despite Mnuchin's reassurances that America is, "open for business," citing the recent tax bill and partial resolution of the US government shutdown as evidence of such, the overall message appears to be one of America's determination to interact on a global scale solely on their own terms.  However, quite surprisingly Secretary Mnuchin said that possible renewed US involvement in the Trans-Pacific Partnership (TPP) was not off the table, but stated the US' preference for, "fair," bilateral agreements.
 
Start of tariff wrangling?
 
Sharing the podium with Secretary Mnuchin was Commerce Secretary Wilbur Ross, another one of the prominent American delegates.  Mr Ross spoke out in defence of the American trade tariffs announced this week against foreign-made washing machines and solar panels, sparking outcry in both South Korea and China where both of these products respectively are commonly made.  Both countries are moving towards filing formal complaints with the World Trade Organisation (WTO).  Secretary Ross implied that more tariffs would be implemented in the future.
 
Overall evaluation and what could come next
 
To evaluate the intensity of the two in-tandem speeches of Mnuchin and Ross, one must look towards who may be giving the directive for such unforgiving and unapologetic ferocity.  Such strong-armed assurances of continued American hegemony were quite possibly ramped up to present a united front to the Davos attendees, many of whom are either publicly or privately quarrelling with the US over a variety of policy issues, ahead of President Trump's speech on Friday.
To hear such comments from two of President Trump's most prominent economic advocators is not surprising, nor unexpected.  Though supporting a continued weakening of the dollar's strength is a move in a new direction, it is not out of character for the Trump administration in their quest to restore, "American industry," to its former glory.  The continued wrangling over NAFTA renegotiations, trade relations in the Pacific, amongst other issues shows the shift in American interest within the last year and highlights the different realities occupied by the various Davos attendees.  One could now expect dollar, whose said weakening is sanctioned as favourable by the US government, to fall further in the coming months.  Could this be a boost to American exports, and promote higher levels of foreign investment into the American economy?  Quite possibly, but these switches depend on the continued cooperation of Congress with the policies of President Trump.  The tax bill, highlighted as a massive boost for corporations to do business in America, was only possible due to Republican control of both the House and the Senate.  Again, as highlighted last week, keep a sharp eye on the 2018 midterm elections in November.
 

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