As the media reacts to statements by the President-elect regarding tariffs on Canada and Mexico and taking Greenland from Denmark, I have to counsel caution about the weight and gravity of Donald Trump’s pre-inauguration pronouncements. Mr. Trump is not yet the President of the United States and until such time, trading desks should not pull the trigger on trades until they have something concrete to analyze.
Let us take the 300,000-foot view of what state powers do: they issue narratives. The Executive does that through executive orders, rules, and policy. Traders should not spend too much time analyzing wishful thinking but instead should put their emotional energy in check by waiting for the thinking of a wishful candidate or nominee, or president-elect to be put into a concrete executive order, rule, or policy that can be both qualitatively and quantitatively analyzed.
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Take, for example, the use of the International Economic Emerging Powers Act as a mechanism for addressing Canada’s alleged subsidization of its exports to the United States. 50 U.S.C. Section 1701 allows the President to declare that forces outside of the United States are posing an unusual and extraordinary threat to the national security, foreign policy, or national economy of the United States.
With regards to foreign exchange, 50 U.S.C. Section 1702 allows the President to investigate, regulate, or prohibit any transactions in foreign exchange; transfers of credits or payments by, through, or to any banking institution to the extent such transfers or payments involve the interests of any foreign country or national; or the importing or exporting of any currencies or securities by any persons or, with respect to any property, subject to the jurisdiction of the United States.
50 U.S.C. Section 1703 requires that before taking any action, that the President must consult with (not seek permission of) the Congress.
Traders should be asking themselves at a minimum what types of unusual or extraordinary threats are Canada and Mexico posing to the national security, foreign policy, or national economy of the United States? Not only must the incoming Administration pose this question to itself, but members of Congress will want this question answered themselves.
Given the recency of this political poking, I am not surprised that Senate Majority Leader John Thune, Republican of South Dakota, and House Speaker Mike Johnson have not made public comments about Mr. Trump’s threats. This should also provide traders some insights into how much potential pushback Mr. Trump may get from his own party.
Alton Drew
8 January 2025
Show notes
https://www.law.cornell.edu/uscode/text/50/1701
If you are in need of a legal or political risk assessment regarding your trading environment, reach out to me on LinkedIn or email me at altondrew@altondrew.com to make an appointment. The hourly fee is $175 per hour.
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