Are America's Asian creditors getting tired of Donald Trump and his temper tantrums? An article in the South China Morning Post, Hong Kong's newspaper of record, suggests patience is running thin.
Asian governments hold the deed to an economy Trump is mismanaging – more than US$3 trillion of US Treasuries. The spectre of massive fiscal losses will be keeping Trump’s Asian bankers awake at night.
It’s weird that Trump would cosy up to Russia’s Vladimir Putin, whose economy is about the size of South Korea’s, and make a foe out of China’s Xi Jinping, Washington’s top creditor.
...Trump finding a foe in his own Fed head, Jerome Powell, would be dreadful for Asian economies, companies and investors. The spectre of the most powerful leader brawling with the world’s top monetary authority throws yet another imponderable at a region on the ropes.
...That puts Powell in an impossible situation. Hiking interest rates at the forthcoming policy meeting from July 31 to August 1 could have Trump slamming the Fed on Twitter. Throttling back could increase overheating risks. Either outcome risks denting the dollar’s credibility and driving up US bond yields.
Trump, let’s remember, added to Powell’s stress level with a US$1.5 trillion tax cut, which an economy at full employment didn’t need. What did the former businessman think would happen when he tossed additional financial lighter fluid at a blazing economy?
...On top of the Russia-collusion scandal, Trump might be courting a controversy of meddling in the Fed’s affairs. It might give Asia less confidence to hold trillions of dollars of American IOUs.