Donald Trump is spooking investors. US stocks are badly underperforming their international counterparts.
Much attention has focused on tariffs, but it’s increasingly clear that trust – or the lack of it – is an even bigger issue for many, with Trump subject to fewer constraints than investors anticipated.
Vincent Mortier of Amundi, Europe’s largest asset manager, recently warned the “biggest threat” facing American markets was if “big foreign investors” lose trust in the US. The hegemony of the US dollar was linked to trust in the US system, in the Federal Reserve, in the US economy, he said.
Trump’s assertion of more control over independent US financial watchdogs is “a big, big mistake”, he added, saying investors were worried about weaker checks and balances, increased conflicts of interest, fake news and unreliable policymaking.
Deutsche Bank, too, warns the dollar could lose its safe-haven status. “We do not write this lightly,” it cautions. “But the speed and scale of global shifts is so rapid that this needs to be acknowledged as a possibility.”
For companies, there may be unintended consequences. Lawson Whiting, the chief executive of Jack Daniel’s maker Brown-Forman, complains that Canadian provinces removing American alcohol from shop shelves was “worse than a tariff” and a “disproportionate response” to Trump’s tariffs.
This misses the point. It’s not just that the US is upending trade and foreign policies – it is the manner in which it is doing so. Trump’s contemptuous references to “Governor Trudeau” and Canada being the “51st state” angers people, making a backlash inevitable.
Similarly, following a visit to Germany’s financial capital, Frankfurt, Bloomberg’s John Authers noted JD Vance’s name kept coming up. The US vice-president “appears to be by a wide margin Frankfurt’s most despised living human”, noted Authers. Noting German plans to convert factories to make defence equipment, Authers observed it will be “politically difficult” to buy US arms due to anger towards America.
Trump’s “MAGAlomania”, as the Economist calls it, is alienating investors and undermining the US. Trust, once lost, is not easily regained.
