𝐖𝐡𝐚𝐭 𝐢𝐬 𝐓𝐫𝐮𝐦𝐩’𝐬 𝐞𝐧𝐝 𝐠𝐚𝐦𝐞?

The one acquired skill that truly helps me be a prudent investor is that I am open minded. I am not afraid to question my beliefs, share my ideas, learn from debate and evolve my opinion continuously. It is really important to have the capacity to set aside your bias and think clearly.

Most people on eToro are European and do not trust Trump, but I will assume that he and his team are acting rationally to achieve an end goal, that they believe is in the best interest of the US. This is what his voters believed, and we must respect the democracy. That doesn’t mean he can’t be wrong, but he has the mandate to do what he promised.

𝐓𝐡𝐞 𝐜𝐚𝐬𝐞 𝐟𝐨𝐫 𝐭𝐚𝐫𝐢𝐟𝐟𝐬

The US is by far the largest consumer of imported good from around the world. The import volume for 2024 was around 4.1 Trillion USD.

A large part of this import volume comes from American companies like Apple that moved manufacturing to countries like China and Vietnam, because it is cheaper to manufacture products in these countries. The iPhones that are sold in the US are imported from the Vietnam and count towards the import volume to the US.

Now, the US ran a trade deficit of 1.3 Trillion USD in 2024. In simple words, this means that the US is sending out 1.3 Trillion USD every year more than it is getting back.

This sounds like a huge problem and unsustainable in the long run and this is what Trump is trying to solve. He can reduce the deficit by exporting more or importing less.

By imposing tariffs, Trump is trying to force other countries to negotiate trade deals and reduce tariffs on goods imported from the US. It is also a way to incentivize local production in the US and reduce the import volume. This should also bring more jobs to the US. This is his populist political pitch.

However, there is some nuance to it.

𝐓𝐡𝐞 𝐭𝐫𝐚𝐝𝐞 𝐝𝐞𝐟𝐢𝐜𝐢𝐭 𝐢𝐬𝐧’𝐭 𝐬𝐡𝐨𝐰𝐢𝐧𝐠 𝐭𝐡𝐞 𝐟𝐮𝐥𝐥 𝐩𝐢𝐜𝐭𝐮𝐫𝐞.

When someone in Germany buys an iPhone, this phone is imported from Vietnam, and contributes to the trade deficit of the US. However, Apple earns a profit from this sale of iPhone and must pay taxes in the US for this profit. Apple also uses revenue from the sale of iPhones to create jobs for US citizens who will pay taxes on their income. So even though the iPhone does not count as an export from the US, the US government still gets tax revenue from Apple for the sale of iPhones around the world. Granted, there are ways for Apple to save taxes by shifting profits to Ireland and other tax havens, but obviously the no one cannot go after this since Apple and other companies are major donors to both political parties.

𝐆𝐥𝐨𝐛𝐚𝐥 𝐭𝐫𝐚𝐝𝐞 𝐢𝐬 𝐧𝐨𝐭 𝐚 𝐳𝐞𝐫𝐨-𝐬𝐮𝐦 𝐠𝐚𝐦𝐞.

Trump in his political rhetoric has implied that the US has been subsidizing the rest of the world by moving manufacturing jobs to other countries and by importing their products. Meanwhile other countries charge heavy tariffs on US products being imported to their countries.

By moving jobs to countries, the US has definitely contributed to economic growth in these countries but the US has also benefited from this growth. Without this growth, Apple would not have a market in these countries.

Import of goods from around the world, offers choices to consumers and spurs economic activity. A large majority of products in Walmart are imported from other countries. Imagine if you found the same brand of cookies every time you go to the market, you will quickly be bored with it. The variety promotes competition among companies and motivates consumers to buy more products.

Moreover, since the US is the biggest trade consumer for most countries in the world, it can set the rules for the trade. This is a big reason why US Dollar is the currency used for international trade. This is a very powerful leverage that the US does not want to give up.

𝐒𝐨 𝐰𝐡𝐚𝐭 𝐢𝐬 𝐡𝐞 𝐚𝐟𝐭𝐞𝐫?

There is absolutely a strong case for the US government to be able to renegotiate trade deals in its favor. The 1.3 Trillion USD trade deficit is a bit too much. There have been bad policies by past governments on both sides of the aisle that have led to this trade imbalance and it should be reversed.

However, Trump is using a sledgehammer where he should be using a scalpel. By pissing off friends and foes, he may end up forcing them to unite against the US. But perhaps he is correct in thinking that the US is an indispensable trade partner and this may be the most effective way to bring change. If every country signs a bilateral trade deal with the US to reduce trade tariffs, this could be a huge win for the US companies.

Moving production inland could have other strategic advantages for national security. If there is a conflict with China, the US could be in a big trouble because it depends on China and other countries in the South China Sea for critical supplies. By bringing manufacturing capability to the US, he may be preparing for a war. I tend to be a pacifist but we should never forget that wars are inevitable.

𝐖𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐚𝐥𝐥 𝐭𝐡𝐢𝐬 𝐦𝐞𝐚𝐧 𝐟𝐨𝐫 𝐮𝐬?

It’s very hard to tell what will happen next. While countries have reserved their opinions about tariffs, I am sure there are back channel communications happening not just with the US, but among these other countries.

It may be very hard for countries to quickly reform their policies and negotiate new trade deals to avoid the fallout from tariffs. Even if Trump rolls back tariffs or delays enforcing them, there will be a huge impact on trade. We may see supply chain disruptions, leading to prices rising. We may see job losses, which lead to recession and low consumption.

The stock market over-reacts to every news, as it did yesterday and will likely continue today. I expect things will stay volatile as every one is intently following everything Trump is saying.

In the mid to long term however, I remain optimistic. It may be tiring to hear this, but there is no other choice. The US is not only the strongest economy in the world, it is also the strongest military power too and it is also the place that attracts the most talent and produces the most innovations. There is definitely a case to be made for a dedollarization and a shift of world power now more than ever, but if you had to put all your eggs in one basket, you would still put it with the US.

𝐖𝐡𝐚𝐭 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐭𝐡𝐞 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐠𝐨𝐢𝐧𝐠 𝐟𝐨𝐫𝐰𝐚𝐫𝐝?

So the strategy will remain the same. I will be gradually and steadily buy the dips. It’s very important to not get greedy and invest a lot of money at the same time. Instead you want to regulate your budget and slowly invest money regularly.

I had originally planned to grow my exposure to the stock market rapidly, but due to volatile conditions in 2024 I held back on adding funds. I have a large capacity to add funds, but I will add them gradually. I expect to double my personal exposure to the stock market this year. I strongly recommend you to do so too.

Thank you for reading. I welcome your opinions and counter-opinions. If you are able to convince me with reason, I will not be shy to admit mistake and change my mind.