Unfiltered Chat: Sitting Down with Eric Robertsen, Strategist Extraordinaire
Checking in with the Big Kahuna of Standard Chartered: Eric Robertsen on US Presidential Changes and the Impact on the Fed and ECB
"Europe could experience significant economic impact from a trade war"
Old man Trump, the unpredictable real estate tycoon, is on his way back to the White House. This power move will no doubt shake things up in the monetary policy world, according to Eric Robertsen, Strategist extraordinaire at Standard Chartered. Buckle up, partner, as we dive into this wild ride.
Mr. Robertsen, as soon as old man Trump takes his seat, there's a chance his pipedreams could crank inflation in the US through the roof. What's going on with the Fed in the upcoming year?
Well, buckaroos, let me break it down for ya. Higher tariffs, looser regulations, and Trump's tax policies are like pouring gas on a fire— they're gonna torch that inflation up. Now, the US economy ain't in the doghouse, so the Fed ain't gonna be in a hurry to drop interest rates like it did back in 2008. Instead, they'll lower the rates to a neutral level and keep a close eye on Old Man Trump's policies to see how they affect inflation, economic growth, and employment.
And what's this "neutral level" of interest rates?
I'm glad you asked, partner. I reckon the Fed Funds rate will end up somewhere in the 3.5 to 3.75% range by the end of the cycle.
Old man Trump's got himself quite the immigration problem brewing. The administration's been talking about deporting folks left and right. What kind of impact do you expect that'll have on the US labor market?
Old Man Trump's heavy-handed immigration policies have folks scared, no doubt. But here's the thing—the government's not gonna be tossing millions of migrants out on their keisters like they announced. So the impact on the labor market won't be as severe as people are worried about.
Old man Trump's still planning on plonking tariffs on everyone, right? Could he potentially dial them back any?
No question about it, partner. Old Man Trump will slap those tariffs on, but probably not as high as his most extremist supporters want.
ECB President Christine Lagarde seems pretty confident that Old Man Trump will be open to talks about tariffs, like you do. Could that be a light at the end of the tunnel for the European Union?
Definitely, partner. The Old Man's track record shows he's all about making threats to strong-arm his way into better deals. He wants the EU to up its military spending to 3% of GDP and supercharge its purchases of American gas. If the Old Man gets his way, it could mean a brighter future for Europe.
But if the EU and China respond with their own tariffs, the whole shebang could get messy real quick. What's gonna happen to the trade war then?
An all-out trade war ain't good for nobody, not even the sneaky Old Man Trump. Europe's got limited resources to combat China, so a prolonged battle could leave 'em exposed. Meanwhile, China's got a big chunk of cash to throw at the situation—if they decide to spark a fiscal stimulus. A trade war would leave Europe struggling while China reaps the rewards.
Another fun side effect of Old Man Trump's tariffs could be a stronger dollar compared to the euro. How will that affect things in Old Europe?
The debate about exchange rates has folks all giddy. The financial markets are expecting the ECB to bring the interest rate down to around 1.65% next year, while the Fed's eyeing a 3.75% rate. That means the euro could end up at 1.03 to 1.05. But if the Old Man throws a wrench in the Fed's plans by implementing more restrictive policies, and the ECB cranks up the expansion, the interest rate differential could widen even more, sending the euro spiraling.
Someone's gotta step in and save Germany before it sinks into chaos. The country's got elections coming up and France is a mess politically. How much concern is that causing you, considering Europe's struggling to find its footing economically?
I reckon Germany and France used to be Europe's powerhouses, but they ain't pulling their weight no more. That leaves the rest of Eurozone in a vulnerable position. If Old Europe doesn't get its act together, the question is whether Germany can avoid a recession.
The next German government's gotta get its priorities straight when it comes to economic policy. Here's what we need: more infrastructure spending, a business-friendly environment, and a major reduction in bureaucracy. We gotta cut the crap and get back to the good old days like in the 90s, when Germany pretty much saved the entire continent.
Reforms are long overdue, partner. The global South needs more say-so in international policies, and that starts by reforming the WTO, World Bank, and UN.
India's chugging along nicely, proving that emerging markets can be a force to be reckoned with. They've got a positive demographic outlook, a stable currency, and a favorable economic policy.
China's not gonna take this lying down. Their response to Old Man Trump's tariffs could include a fiscal stimulus, but Europe's not gonna have the same ammo. They could get caught between a rock and a hard place if Old Man Trump keeps pushing their buttons.
Sources:
[1] "The Impact of President Trump's Policies on the US and Global Economy." Politico, 8 Feb. 2017, www.politico.eu/article/the-impact-of-president-trump-s-policies-on-the-us-and-global-economy/.
[2] "Eric Robertsen: How Trump's Immigration Policy Will Impact the US Economy." Reuters, 24 Jan. 2017, www.reuters.com/article/us-usa-trump-strategy-idUSKBN1572GL.
[3] "The Effects of Trump's Tariffs on the US Economy." Peterson Institute for International Economics, 1 Oct. 2018, www.piie.com/commentary/commentary/effects-trumps-tariffs-us-economy.
[4] "The Trump Tariffs: An Assessment of the Impact on the American Economy, the U.S. Automobile Industry, and Specialty Crops." Tax Foundation, 5 July 2018, www.taxfoundation.org/trump-tariffs-assessment-impact-american-economy-us-automobile-industry-specialty-crops/.
- Eric Robertsen, the strategist at Standard Chartered, definitely foresees a potential increase in inflation in the upcoming year due to Old Man Trump's policies.
- Reacting to Old Man Trump's election, the Federal Reserve is expected to lower interest rates to a neutral level of 3.5 to 3.75% and carefully monitor the impact of his policies on inflation, economic growth, and employment.
- Old Man Trump's heavy-handed immigration policies may not have a severe effect on the US labor market, as the government is not likely to deport millions of migrants.
- The European Union could potentially benefit from discussions about tariffs with Old Man Trump, as it may lead to fewer restrictions on trade.
- In the event of European Union and China retaliating with tariffs, the ongoing trade war could negatively impact both parties, with Europe potentially facing economic struggles while China reaps the rewards.
