It Looks Like A Looming Monroe Doctrine Pan-North American Trade Stance Is Being Prepared

By Michael Every of Rabobank

20,000 Ledes Under the “See!”

The North American trade war is over before it started, as US tariffs on Mexico and Canada have been paused for 30 days after both offered full cooperation over fentanyl and made 10,000 police officers or military available at the border. So, 20,000 people are paying attention to this problem so millions globally don’t have to keep following it 24/7 in markets.

Everyone gets to say, “See!”: the Trump tariff “because markets” denialists; those who see Trump as having caved after burning US political capital; and those who see Mexico and Canada as having caved, following Colombia, Panama, and perhaps Greenland (which is the reform-minded and muscular “economic statecraft, eh?” Canada that has re-emerged after a decade of torpor is also precisely what the US wants to see – if it can turn it around to face outside North America.

But back to some of the 20,000 Ledes under the “See!”

Those thinking tariffs are not a thing need to consider that Europe is likely next in the firing line – and it doesn’t have a fentanyl issue or a common border with the US (yet). What is the potential deal there? And what if the North America is being reordered to greater purpose than “because markets”?

Relatedly, Trump said new 10% tariffs on China were an “opening salvo” and will go higher without a deal there too – and will speak to Beijing within the next 24 hours on the topic. So, another reprieve and another “See!”?

Look deeper!

China is suggesting a return to the Farce One Trade Deal, which seems unlikely to sell, and to not devalue CNY, which brings FX policy into the open as the economic statecraft it actually is rather than the polite “market” we describe. At the same time, those who have read the recent Trump Executive Order on trade will have noticed the slew of national-security related China-focused investigations already underway, and which are unlikely to only conclude that a 10% tariff is an appropriate palliative:

• Commerce, with Treasury and the USTR, will investigate the causes of large, persistent US trade deficits, as well as the economic and national security implications and risks resulting from them, and recommend appropriate measures, such as a global tariff or other policies.
• Commerce, with the Secretary of Defence and relevant agencies, will conduct a full economic and security review of the US industrial and manufacturing base to assess whether it’s necessary to initiate action to reduce imports that threaten national security.
• Commerce and the USTR will assess legislative proposals over China’s Permanent Normal Trade Relations status and make policy recommendations regarding any changes; together with the SCTM, it will also review the US-China Phase One Trade Deal to determine whether China is acting in accordance with it and perhaps impose tariffs; and China’s trade circumvention through third countries; and/or policies which burden or restrict US commerce.
• President Trump has now twice threatened 100% tariffs on any BRICS countries considering dedollarisation.

In short, expect much more volatility ahead, almost everywhere: see our Australia-New Zealand strategist Ben Picton’s take on The US is to launch a sovereign wealth fund. Some will ask how a country running large twin deficits can save for such a fund – but thinking like an economist is wrong; others wonder which financial assets will be bid up by it – but pure Fartcraft, is also wrong. The Executive Order states the federal government directly owns $5.7 trillion of assets, and indirectly far more. These will now be leveraged “to invest in great national endeavours for the benefit of all of the American people.” That might mean TikTok, which doesn’t seem to make money, but is a national security issue; or crypto to fuse dollar-based Fartcraft to its main purpose – directing huge funds to national security/warcraft areas requiring long-term, low-cost capital.