Today marks two weeks since Donald Trump’s inauguration. Who knew that two weeks would feel like a lifetime? Ordinarily, the period following a new President’s inauguration is called the “honeymoon” because Congress and the public give the new guy a chance to prove himself. This honeymoon feels like one in which the bride awakens to find a man next to her who overnight moved not only himself, but also his truck, his dogs, twelve children from three marriages, and all of his buddies and all of their beer kegs, dogs, kids, and trucks into what used to be her house. Maybe it won’t be all that bad, but right now it’s noisy, disorderly, and a couple of bystanders just got bitten even as most of the furniture is broken. Which brings me to global trade in financial services.
Next week, FedFin will release an in-depth assessment of how trade in financial services will fare as President Trump proceeds to rip up the premises of U.S. trade in goods known since this country signed on to the World Trade Organization. So much is going on so fast with so much force for trade in goods that few have noticed the intimate relationship between trade in goods and trade in services. In short, if one is curtailed, the other is choked. And, if the service in question is finance, then it chokes still harder because trade in financial services depends not only on open and fair transit of capital, but also on open and fair borders so money can finance trade wherever trade goes and thus make everyone wealthier. Without trade in goods, there is no trade finance, a whole lot less foreign-exchange action, and a whole lot more impediments to the cross-border infrastructure that supports not only trade, but also global financial stability.
Of course, several top Trump Administration officials know full well the critical importance of cross-border finance. That’s doubtless why today’s Executive Order includes suggestions that the U.S. will remain active in global financial negotiations. Still, signs of instability are very much upon us just fourteen days into what was supposed to be a honeymoon.
So much has happened so fast that forward-looking forecasts are for some overtaken by immediate-impact assessment. This is understandable, but dangerous – without action, the new husbands’s truck, dogs, kids, friends, and all their appurtenances will be here to stay. Maybe we’ll be better off without being in the Financial Stability Board and its sub-groups like Basel, without the IMF, without the World Bank, without the WTO and its provisions on trade in services, and out of the Group of Twenty. Maybe we’ll do better – I doubt it, but maybe. Even then, though, the rest of the world won’t be and sooner or later a Fortress America behind its trade-in-financial-services moat will look as forlorn as Camelot’s castle at the end of that fabled musical when the lights go down.