Currency war?
The dollar is rising again this morning. The greenback’s post-Election Day rally has investors betting that Donald Trump’s low-tax, high-tariff economic agenda could disrupt global trade and accelerate inflation.
The president-elect has added a new threat to his list, saying that he could slap big tariffs on the BRICS group of countries if they were to abandon the dollar.
“We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” Trump posted on his Truth Social network this weekend.
Dmitry Peskov, a Kremlin spokesman, said this morning that the dollar’s appeal is already in decline, and Trump’s latest threats would backfire.
Trump’s warning comes after Vladimir Putin held a gathering of world leaders. In October, the Russian president hosted the BRICS group, which also includes Brazil, India, China and South Africa, and other emerging market economies that he hopes could become a counterweight to the West. (More on the Russian ruble below.)
Moscow and Beijing want to reorder the global markets in part to defang U.S. sanctions, and Brazil has proposed an alternative currency for the Mercosur trade bloc. But economists see no imminent risk to the dollar’s lock as the world’s global reserve currency.
The U.S.’s biggest allies are already anxious about Trump’s trade war threats. Prime Minister Justin Trudeau of Canada traveled to Mar-a-Lago to talk trade and border security, and President Claudia Sheinbaum of Mexico held a call with Trump after he said he would impose tariffs on them. Europe, meanwhile, is bracing for more turbulence.
Trump has long fumed about America’s trade deficit, seeing it as a sign of economic weakness and a threat to jobs. He has also accused China of manipulating its currency to boost the value of the dollar and tilting the balance of trade in Beijing’s favor.
Trump’s demand for dollar fealty could complicate Trumponomics. If he’s serious about lowering the trade deficit, then “a weaker dollar could be the solution,” Valentin Marinov, the head of FX strategy at Crédit Agricole, told Bloomberg TV this morning.
But a trade war could dent growth in the U.S. and beyond, Marinov said. “The game has just started,” he added, suggesting Trump’s BRICS threat was an opening gambit to renegotiate global trade deals.
HERE’S WHAT’S HAPPENING
President Biden pardons his son Hunter on gun and tax charges. The issuing of a full and unconditional pardon — with Biden saying the charges against his son were politically motivated — comes after the president said for years that he would not make such a move. President-elect Donald Trump called Biden’s decision an “abuse and miscarriage of Justice.”
Stellantis sinks in European this morning after its C.E.O. resigns. Shares in the parent company of Chrysler and Jeep were down 8 percent in Europe, after the automaker said yesterday that Carlos Tavares would step down immediately. Tavares’s departure, which comes sooner than expected, follows the company’s sales slump in the crucial North American market.
The Biden administration imposes new restrictions on advanced technology sales to China. The measures announced this morning will prohibit the export of some chips and machinery to the country, and add 100 more Chinese companies to a restricted trade list. It is the third time in three years that Washington has toughened rules to limit Beijing’s ability to build chips that can be used for military applications and artificial intelligence. Meanwhile, China is said to be studying Russia’s evasion of sanctions to prepare for a potential conflict with Taiwan.
Jobs and corporate earnings will be in focus this week. The big event is Friday’s nonfarm payrolls report, with economists forecasting a rebound in the labor market with an uptick in hiring. Also worth watching: quarterly results from Salesforce and Marvell Technologies tomorrow, and Kroger, Lululemon and Dollar General on Thursday.
A battle over “debanking”
With Donald Trump set to return to the presidency, the crypto community is feeling politically ascendant. And some of its biggest backers are taking shots at the Biden administration in its waning days.
The latest salvo came from the venture capitalist Marc Andreessen, who asserted without evidence that several tech founders had been “debanked,” or denied banking services.
The claim: Andreessen said on “The Joe Rogan Experience” last week that some 30 tech founders were debanked because of the Biden administration’s antipathy to the crypto industry, and were forced to keep their money in cash until they found an institution willing to work with them. (That said, he didn’t provide specific examples or proof of why they had been denied services.)
The investor, whose Andreessen Horowitz is a major backer of crypto companies, said that the purported move was partly why he supported Trump.
Andreessen’s assertion was amplified by Elon Musk on X, with several crypto founders saying that they had been denied banking services. Coinbase’s Brian Armstrong, whose company has sued the F.D.I.C. over such claims, wrote on X, “Can confirm this is true.”
Claims of debanking have become a political flashpoint. Andreessen called the purported phenomenon “Operation Choke Point 2.0,” an allusion to an Obama-era initiative to cut off financial services for companies accused of defrauding consumers. Republicans have argued that the program was being used to target legal businesses that were out of political favor.
Crypto executives have since said that the Biden administration, which has sought to rein in the freewheeling industry that has been accused of scams and fraud, has used the banking system as part of a crackdown. Their claims are likely to find a warm reception in the next Trump administration and the Republican-led Congress.
A caveat: It’s unclear if any executives’ financial accounts were closed — and if they were, whether those actions happened because of legitimate regulatory concerns.
Ruble roulette
Cracks are appearing in Russia’s wartime economy. The ruble last week hit a two-year low against the dollar as stagflation fears drive deep divisions between the country’s business elites and its central bank.
The economic woes raise questions about the future of the Kremlin’s war in Ukraine as President-elect Donald Trump comes to power. Russian troops have been making gains in eastern Ukraine. And President Volodymyr Zelensky of Ukraine last week suggested some conditions for entering cease-fire talks, even if they cast doubt on Kyiv’s hopes of reclaiming occupied land.
Is there momentum for a deal? Mike Waltz, Trump’s pick for national security adviser, has called for “a responsible end” to the conflict, but it’s unclear if the terms would be acceptable to Kyiv. And President Vladimir Putin of Russia seems unwilling to back off any time soon, despite the growing economic turmoil.
(It’s worth noting that one Trump adviser seems to have the ear of both Zelensky and Putin: Elon Musk.)
Watch the Russian ruble. “To a significant extent, the exchange rate seems to reflect the mounting inflationary pressures in Russia,” Holger Schmieding, the chief economist of the German bank Berenberg, told DealBook. “It shows that Russia cannot afford to wage this war forever.”
Russia may also have an inflation problem. Moscow says its official inflation rate is 9 percent, but outside monitors say it could be more than double that. That may explain why the Russian central bank has jacked up interest rates to 21 percent, a multi-decade high, to cool off rapidly rising prices.
Russian business leaders have sharply criticized Elvira Nabiullina, the country’s central bank’s chief — and not Putin’s war — for the sky-high borrowing costs that are crimping economic growth. The central bank sees growth, in the worst-case scenario, falling to 0.5 percent next year, down from as much as 4 percent this year.
Another blow: The ruble’s recent decline appears to coincide with a new round of U.S. sanctions on Gazprombank, which is a major financier for Russia’s war machine and its energy industry.
Has the Russian economy become a new wild card in the war? Russia has found ways to avert Western sanctions and expand trade ties with the likes of China and India.
But “the question is whether the West offers Ukraine enough help for long enough to prevail — or whether the West abandons Ukraine before the Russian economy crumbles,” Schmieding said.
The C.E.O. scramble to avoid Musk’s anger
Corporate America is adapting to the return of Donald Trump, including by buying into Trump family ventures and scrubbing their websites of policies likely to draw the president-elect’s ire.
But some business leaders are finding themselves with a thornier problem: dealing with being on the wrong side of Elon Musk, who now calls himself the “First Buddy” — and shares a penchant for attacking enemies.
Sam Altman is reportedly among those dealing with being a Musk foil. OpenAI’s C.E.O., who co-founded the artificial intelligence start-up with the Tesla chief before the two fell out, had appeared to be on better terms with his sometime foe. But Musk has ratcheted up his attacks on Altman in recent weeks, according to The Wall Street Journal:
Since the election, people close to Musk have said he despises Altman. Musk has cranked up the heat on their feud, filing an expanded version of his lawsuit calling OpenAI a “market-paralyzing gorgon.” Musk also pinned his personal correspondence with Altman to his X account and gave Altman his own Trump-style nickname on X: “Swindly Sam.”
Altman, a registered Democrat who chose not to endorse a candidate in this election, felt blindsided, a person familiar with his thinking said.
Altman has made contact with others in the Trump orbit, seeking to put OpenAI in good stead with the new administration, The Journal reports. They include Jared Kushner, Trump’s son-in-law; Kushner’s brother, Josh Kushner, whose Thrive Capital is a major backer of OpenAI; and Howard Lutnick, who co-led the transition team and is Trump’s pick for commerce secretary.
It’s unclear how well the approach will work, with some contacts afraid to pass on Altman’s messages for fear of angering Musk, The Journal adds.
Other C.E.O.s are publicly praising Musk. Among them is Marc Benioff of Salesforce, who wrote on X that his fellow tech mogul was “the Edison of our era” whose government-efficiency initiative could “reshape our country & world.”
Why it matters: Critics of Musk worry that his influence over Trump policy could benefit his companies like Tesla and SpaceX and hurt rivals like other carmakers, OpenAI and competing rocket makers including Boeing and Jeff Bezos’ Blue Origin.
THE SPEED READ
Deals
Two Australian gold mining companies agreed to combine in a $3.2 billion deal as the surging price of the precious metal drives consolidation in the sector. (WSJ)
Unilever is looking to sell food brands with combined sales of about $1 billion. (Reuters)
Politics and policy
“Kash Patel Would Bring Bravado and Baggage to F.B.I. Role” (NYT)
Why Texas may offer Trump a blueprint for cracking down on illegal immigration. (WSJ)
Best of the rest
“Moana 2,” “Wicked” and “Gladiator II” combined to set a record Thanksgiving weekend at the box office. (The Hollywood Reporter)
Mexican cartels have turned campuses into recruitment hubs by luring chemistry students to make fentanyl. (NYT)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
The post Will Trump’s Dollar Diplomacy Roil Global Trade? appeared first on New York Times.
