The Macro Report | February 2018
Sparking a U.S. trade war?
We are seeing a return of the threat of protectionism in the United States. President Trump recently placed tariffs on imported solar panels and washing machines, sparking concern the country may prompt trade wars. This comes as the administration renegotiates the North American Free Trade Agreement (NAFTA) with Mexico and Canada. China has also been a target of recent trade rhetoric. If the administration withdraws from NAFTA, or imposes a spate of anti-Chinese trade measures, there will be downside risks to the U.S. economy.
As trade issues linger, investors also have to contend with a weaker dollar. Treasury Secretary Steven Mnuchin broke with tradition in January when he declared that a weaker dollar is good for American trade. Interestingly, although Mnuchin's comments paved the way for more losses in the greenback, they weren't the key to the currency's weakness. Its decline to three-year lows in January was driven by the U.S. current account deficit and risk appetite. Stronger global conditions also play a role. For example, Germany's economy continues to be a bright spot in the eurozone — enough to encourage local unions to push for higher wages.
Solar panels, washing machines, and Trump tariffs
Trump's trade protectionist push was highlighted by the recent imposition of tariffs on specific sectors.
Spotlight on the dollar
Treasury Secretary Mnuchin breaks with tradition by declaring that a weaker dollar is good for U.S. trade, prompting a further slide in the currency.
About the macro report
The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.
Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis
Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis
Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics
Sterling Horne, Analyst
Politics and economics
Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting
Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics