Griffin on Tech: Trump’s system crash - what it means for us
The US economy was going gangbusters last year as we struggled through a grim period of job losses, business closures, and an exodus of talent.
As the New York Times put it this week: "President Trump inherited an economy that was, by most conventional measures, firing on all cylinders. Wages, consumer spending and corporate profits were rising. Unemployment was low. The inflation rate, though higher than normal, was falling."
Is the US and the world now in for a taste of what we’ve been through as President Trump’s tariff war and DOGE efficiency drive dismantle what was a remarkably robust economy?
That’s the growing fear as Trump’s rhetoric continues on everything from Ireland luring away US companies (never mind it allowed them to pay next to no tax for decades), and slapping a 200% tariff on European wine.
Trump watches the stock market like a hawk, but his tune has changed in the last week.
“You can’t really watch the stock market,” he said this week. Tell that to the millions of Americans looking in horror at their 401k accounts and the many Kiwis here cringing every time they open their Sharesies app.
The volatility, measured in the markets by the VIX index, spiked this week. Trump is showing a willingness to embody volatility in his all-or-nothing “negotiations” on everything from pursuing a ceasefire in Ukraine, to raising tariffs on Canadian imports.
Volatility reigns
What does it mean for us?
For the average investor - losses in our Kiwisaver and share portfolios, the extent of which depends on whether Trump drives the US into recession which could then see some of those stock valuation losses become permanent.
Let’s face it though, if you’ve been heavily invested in tech stocks, and anything AI-related in particular, you’ll know deep down that valuations have been over-inflated. Even with the intial Trump bump wiped off, most tech stocks are around where they were six months ago, which given the reality check the AI industry has received in the last couple of months, seems like a valid correction. Crypto prices have tanked too. Time to HODL (hold on for dear life) and not lock in market losses.
For our startups - The startup fundraising and exits in the early part of the year suggest there’s healthy appetite for investment, with venture capital firms on the hunt as ever for great companies, and multinationals open to acquisitions - witness Yahama’s purchase of Robotics Plus.
But if the US edges closer to recession, the capital pools could start to dry up as investors save their powder for a better economic outlook.
For our exporters - We have so far managed to stay off Trump’s radar when it comes to tariffs, which would mainly hit our agricultural exports if applied, and potentially, Tiwai Point’s high-grade aluminium output.
Trump complained to Irish premier, Micheál Martin, this week about Ireland’s booming pharmaceuticals industry which does great business selling drugs to the US.
“I’d like to see the United States not have been so stupid for so many years, not just with Ireland, with everybody,” said Trump who wants “balance” in trade flows as if it logically makes sense that every country should take as much as it receives in global trade.
The US trade deficit with Ireland was around US$12 billion last year. New Zealand’s was a modest US$1.1 billion, and declined by around $60 million. That speaks to our inability to make inroads into the all-important US market in the last year, but could insulate us from any punitive measures from Trump as he looks to whittle away the US trade deficit.
Tariffs on exports of software and digital services continue to be out of scope which is a relief for our tech companies selling into the US.
For our national security - The most fundamental impact Trump has had in his short time back at the White House is triggering what will likely become a massive increase in defence spending in the European Union. That even extends to us, with May’s Bidget expected to have significant new funding to refresh our ageing and under-equipped defence forces. Then there’s the future of security pacts like Five Eyes and the Aukus agreement as the US favours a more unilateral approach to policing its global interests.
The tumble in markets this week is a manifestation of the fear Trump has created in short order and the realisation at just how disruptive the next four years are likely to be.
Photo credit: Maxim Hopman, Unsplash
