Alexander Firanchuk: Trump's unpredictable economic decisions have undermined confidence in trade with the US

«Any business, especially one involving the production of complex products, requires stable operating conditions. Simple reconfiguration of logistics chains sometimes takes months, while changing production volumes and moving facilities to other countries takes years. At the same time, the administration of US President Donald Trump is able to change the rules of the game literally within one week. And the problem is not even in the speed of changes, but in the fact that these changes are completely unpredictable for the market. The instability set by Mr. Trump will long deter the willingness of U.S. and foreign companies to invest in the US economy and trade with the United States. Clear and stable rules are one of the most important requirements for any business," the expert believes.

Alexander Firanchuk noted a significant decline in the US stock markets. «The broad market index S&P 500 at the moment was losing up to 12%. After that, Trump gave a reversal, maintaining prohibitive duties only against China. Markets have partially recovered from the fall, but remain extremely volatile and remain below the levels of previous months. The index is now about 7% lower than before the announcement of the next round of tariff measures a week ago," he said.

Such a fall, according to the expert, is comparable to the average annual return of the stock market. «There were no other significant world events during this period — all the turbulence and market decline are related solely to the actions of the Trump administration. This situation is generally not typical for developed economies," he noted.

The expert added that under the uncertainty, big business inevitably thinks about «how predictable are the rules of the game in other sectors of the US economy, and whether it is time to withdraw some capital outside the US financial market." «There are at least two pieces of evidence for this. First, the market is seeing large-scale selling of US government debt, the reliability of which has come into question for the first time in a very long time. Since April 4, the US government bond yields have risen from 4.0% to 4.4%. This is a significant change that raises the cost of servicing government debt in the long run. The point is that the key is not so much the size of US government debt itself, which is indeed impressive, but the combination of the size of the debt and the effective interest rate. If it is practically impossible to change the size of the debt in the short term, then actions that undermine market confidence can significantly increase the cost of servicing it," explained Alexander Firanchuk.

Secondly, according to the expert, other things being equal, import restriction usually reduces the demand for foreign currency and strengthens the national currency. However, the dollar, on the contrary, weakened noticeably against the currencies of other developed economies. «The reason is that other conditions turned out to be unequal: probably, international capital began to look for more reliable and predictable harbors. So far, these processes are not so large-scale and are not harbingers of an imminent crisis, but clearly indicate that what is happening does not contribute to the relief of the burden of public debt and in no way strengthens the position of the U.S. in the global market,« — concluded the expert.

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