{"id":14152,"date":"2025-10-09T12:42:34","date_gmt":"2025-10-09T10:42:34","guid":{"rendered":"https:\/\/swisschange.ch\/2025\/10\/09\/trumps-mercantilism\/"},"modified":"2025-10-09T13:00:36","modified_gmt":"2025-10-09T11:00:36","slug":"trumps-mercantilism","status":"publish","type":"post","link":"https:\/\/swisschange.ch\/en\/2025\/10\/09\/trumps-mercantilism\/","title":{"rendered":"TRUMPS MERCANTILISM"},"content":{"rendered":"\n

EMR October 2025<\/p>\n\n

Dear Reader,<\/p>\n\n

Historically mercantilism<\/mark><\/a> was a \u201cstate-controlled economic policy\u201d from the 16th to the 18th century. Its aim was to strengthen the economic power of the state and accumulate national wealth, primarily through a positive trade balance as well as the accumulation of precious metals. The system was characterized by massive state intervention, such as the promotion of domestic manufacturing and the protection of domestic production through high import duties.<\/p>\n\n

The effects, outlined above, clearly describe the current policy of the Trump administration, which consists of high import tariffs on a country-by-country basis. The current objectives can be described as an active trade balance with the primary goal of improving the trade balance and thus strengthening the national economy. In i\u00f3ther words, with the recent actions of president Trump we assist to an absurd mercantilist revival, through the maximization of exports and\/or the minimization of imports, by means of considerable taxation, varying from the various partner countries but primarily in favor of the United States.<\/p>\n\n

Fact is that the trade balance, as we all know, is not a complicated concept, given that it is simply the difference between what a nation exports\u2014both as goods and\/or services\u2014and what it imports. If the former amount is greater than the latter, we register a surplus\u2014otherwise a loss.<\/p>\n\n

Trumps concept and actions aim to reduce a further current accounts deficit or to reach a current accounts surplus. In addition it includes measures aimed at accumulating monetary reserves by means of a positive balance of trade, without taking into account the repercussios on the trading partners. The current attention to the mercantilist theory varies in sophistication from one writer to another and at the same time it evolves significantly. <\/p>\n\n

Fact is that mercantilism promotes state regulation of a country’s economy in order to strengthen the power of the state at the expense of rival national powers. Disunity is the dangerous result of current policies. The current economic environment is generally defined or considered to be rather unique. Beeing interested in the relevance of developments, both current and long-term, we are aware of factors that are not adequately addressed in press reports and also in recent studies. We like to remember that price trends, as demonstrated by long-term data available in the United States, tell a story of constant change, sometimes minor, sometimes dramatic, and sometimes difficult to assess coherently. Therefore, we should bear in mind that inflation is a persistent problem, one that we may have to deal with, not only in the immediate future, but also longer term.<\/p>\n\n

In other words, as stressed e.g. in the FRBSF Economic letter of September 2, 2025 \u201cRecent surges in trade policy uncertainty highlight the fragility of global supply chains, prompting businesses to consider reshoring\u2014moving production from abroad to domestic locations. Reshoring can be costly, creating incentives for businesses to automate. Evidence suggest that businesses facing heightened trade policy uncertainty in industries more exposed to international trade reshore more and automate more than those that are less exposed to trade. Automation appears to help mitigate the otherwise negative effects of trade policy uncertainty on production and labor productivity.\u201d<\/p>\n\n

What may be the implications for our asset allocation is the real question, isn’t it? Below we will present our expectations.<\/p>\n\n

PERSONAL ASSESSMENT<\/h2>\n\n

From the rather complicated situation described above, we draw the following conclusions:<\/p>\n\n

    \n
  1. Economic and financial uncertainty is expected to persist for a rather long period of time.<\/li>\n\n\n\n
  2. Currently, the two most important and decisive economic sectors are \u201cforeign trade\u201d and the \u201cU.S. repatriation of capital investments from abroad\u201d. Thus, we somehow are in contradiction with the current focus on interest rates as the primary determinant. In addition we assume that these developments might persist for a rather long period of time.<\/li>\n\n\n\n
  3. Consequently, we wonder why the overall public assessment remains focused on interest rate adjustments to curb inflation and promote economic growth. Meanwhile, investors are asking themselves how long Trump\u2019s disastrous nationalist stance is likely to last and what the consequences might really be.<\/li>\n\n\n\n
  4. Asking ourselves what the implications of the Trumps taxation might be, we primarily retain that they will forse businesses to consider the impacts of reshoring of variouss products from abroad despite knowing that it might be a costly exercise, forcing businesses to automate in order to reduce costs.<\/li>\n<\/ol>\n\n

    We are somewhat concerned that this environment could fuel trade policy uncertainty (TPU), an index developed by Dario Caldara, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino and Andrea Raffo at the Federal Reserve Board. In other words, this attitude is synonymous with deglobalization, which will eventually require an adjustment in production lines. Its impact on export and import growth, and therefore on real economic activity, is likely to be significantly greater than the demand for interest rate adjustments by monetary authorities.<\/p>\n\n

    REPOSITIONING AND AUTOMATION<\/h2>\n\n

    The phase of dismantling trade barriers and the willingness to increase economic integration have reached a decisive crossroads. The tariff measures recently implemented by the Trump administration speak volumes. Isolationism is returning to the spotlight.<\/p>\n\n

    OUTLOOK<\/h2>\n\n

    At this juncture, we believe that the determining factor in the current forecasting exercise concerns the inflationary repercussions of Trump\u2019s fiscal mania. Therefore, we disagree with the vast majority of analysts who believe that monetary measures are the most promising course of action for economic growth. We do not see how monetary actions by the Fed, or any other central bank, can be the primary deterministic actions, given the dramatic inflationary impact of Trump\u2019s fiscal stance.<\/p>\n\n

    We base our current assumptions on the following premises:<\/p>\n\n