Who Will We Trade With If the Fed Doesn’t Lower Rates?

At least according to Trump: Well, according to Census data through July, not many countries: Belgium, Netherlands, Spain (although they drop out if European Union as a whole is taken as a “country”), Egypt, Nigeria, UK. It’s not clear under what authority the president would stop all trade with a given country, say the UK. IEEPA? More from NYT. The strange thing is not just that he doesn’t know things – it’s that he doesn’t seem to know that he doesn’t know. Furthermore, he seems incapable of asking or even taking some input from people who know things. Even if he hire his Secretary of … based on whether they “look the part” (instead of their knowledge and competence); he could, as POTUS, call anybody in the country and ask them questions (i.e., learn things). No need. He’s a very stable genius. A “strong country” means lower interest rates? If by “strong country”, he means fiscal restrain, the rule of law, a strong democracy and peace on home soil, well sure. If, instead, “strong country” means strong economic performance, he’s utterly wrong, as usual. Take a gander at GDP and jobs growth alongside the fed funds rate: https://fred.stlouisfed.org/graph/?g=1YdBp Weak growth goes with low interest rates, strong growth with higher rates, amd anybody with any real understanding knows it. None of this matters, of course. The felon-in-chief says things about the state of things that aren’t true many times every day. Sometimes, he knows he’s lying. Sometimes he’s misinformed. He never cares. A question that has come up a lot since the war-of-choice against Iran began is how long before the inventory squeeze becomes critical. Here’s a non-specialist who has made a stab at answering the question for the U.S.: https://freerangestats.info/blog/2026/08/01/fuel-crisis He offers a couple of arbitrary thresholds in terms of days of refinery cover – 30 and 24 days – and estimates that we have 19 weeks of cover left at the recent burn rate. The election is in about 8 weeks, with early voting a week or two sooner in some places. The Republicans haven’t dodged many bullets this year, but based on this estimate, they’re dodging this one. Of course, this forecaster admits his work is flimsy, so who knows? Keep in mind that to Trump there is no such thing as “trade”. There are only deals. And the only deals he accepts are “I win and you lose.” He considers any deal in which he gets something and has to pay for it as a loss. That’s his entire business career. He gets stuff, goods or services, but never pays his bills as he considers that losing. So he stiffs his lawyers, he stiffs his contractors, he stiffs his bankers, he stiffs his employees. “Sue me.” So the entire idea that the US pays its bills for oil or electricity or fertilizer or auto parts from Canada is viscerally offensive to him. Only chumps pay their bills. No deal at all is better to him than a deal that he considers losing. There’s nothing rational about his beliefs on trade. It’s all narcissistic gut vibe. Roughly 1700 dead from Iran war (that’s assumably low number) and IMF is estimating 70% inflation. Iranians going to “only” porous part of border with Turkey to purchase cooking oil. Also story in Sunday’s hardcopy NYT about corrupt native weapons suppliers giving ineffective weapons to Ukraine military, but being rewarded with new contracts from Ukraine gov after being found corrupt. Doesn’t help much when Zelensky runs around to other nations with his hand out when he rewards corrupt weapons suppliers. Unless Zelensky’s argument is “we are so inept at punishing domestic corruption that we need foreign supplied weapons” /sarc Ukraine was a training-wheels democracy with a not-so-strong attachment to the rule of law when Yanukovych took over and Yanukovych was a disaster. I don’t know whether Zelensky is happy to engage with corrupt suppliers, or simply thinks he has no choice. What is pretty obvious is that Russia has been doing the same old pot-calling-the-kettle-black propaganda stuff it always does, all “Nazi, Nazi, Nazi” and “corrupt, corrupt, corrupt” and we can’t help but hear it. There’s a line somewhere, past which we should withdraw support, but I don’t think Ukraine is anywhere near it. The problem, I fear, is that how ever the war ends up, Ukraine will be next door to Russia when its over, with all the corrosive effects that implies. Democracy ald the rule of law will always be hard for Ukraine. But then, who are we to talk? Bessent today on Canada: “You know, I had a German Shepherd and there was a dachshund that used to antagonize her at the playground — and it kind of reminds me of that. And this little yippy dog, used to just like bark away, and for a long time, the 110 pound German Shepherd was ignoring the dachshund.” “And then one day she had enough.” You know, this guy is Secretary of the Treasury for goodness sake. He’s edging into Pete Hegseth’s lane with threats of violence. Bessent has a history of this. He got into a shouting and pushing match with Housing Director Bill Pulte in a restaurant. “F*** you. I’m gonna punch you in your f**ing face.” Then Bessent demanded they take the matter outside. “I’m going to f*ing beat your ass.” Bessent also got into a physical brawl and expletive spewing argument with Elon Musk — in the Oval Office! (Dr. Strangelove: “Gentlemen, you can’t fight in here! This is the War Room!”) This is the loon Trump has tasked with working with central banks around the world to stabilize the economy. Note that this week the Dutch Central Bank withdrew 90 tons of gold from the vaults at the NY Federal Reserve Bank. This follows France removing 130 tons of gold last year. Germany has removed 120 tons of gold. Much of this gold has been there since WWII. Apparently they no longer consider the US as a safe place to store their assets. It’s no wonder why. There is precedent for Trump simply saying “It’s in our vaults. We own it now and you don’t. If you want it, what are you going to do for me.” It’s hard to believe we once had an intelligent, stable, trustworthy Treasury Secretary, Janet Yellen. Like a barely remembered fairy tale, it seems like a time long, long ago and far, far away, never to be seen again. He is just trying to please the boss by emulating him. Clueless moron trying to intimidate. I mean that went so well with Iran, right?. If it’s a great way to lose a hot war, then why not try it out in a trade war. The good news is that Canada has a competent government. They have “war-gamed” out every possible scenario and their response to our erratic responses. From a strategic point of view Canada HAS to disentangle from US so they will never again be this vulnerable to our hostile trade actions. Most of the US-Canada trade is historic rather than strategic. We don’t sell them much that they couldn’t get from somewhere else, and most of what they sell to us could get shipped somewhere else. The main advantage has been that transportation with a truck or train crossing the border is less expensive than shipping thousands of miles across the ocean. However, with large enough ships it’s not a big difference. Call it the cost of freedom and I think Canadians are willing to pay it. When you look at products traded between US and Canada there is nothing Canada couldn’t unwind. The main products are automotive. Canada can simply invite Chinese EV companies to set up factories in their country. A lot of what Canada exports in that sector could instead be used in their own country – and they would get better cheaper vehicles. Canadian excess production of oil and natural resources could be absorbed in the world markets. The trade war will actually help Carney with the needed decoupling from US. Canadians will blame the disruption and cost on US, and they will be more than willing to suffer it as a part of the resistance to Trumps hostilities (rather than if it was just a sensible strategic move against a theoretical problem of dependence). This may actually be the best opportunity ever for Canadian politicians to reduce dependence on US. Like with Iran the US strongest position was back in March, ever since it has been slipping and there is no stopping that slide. Maybe Bessent’s anger comes from realizing that he has much less leverage than Trump seems to think. US Envoy Scott Witkoff yesterday in the Kremlin speaking to Putin: “When we retire, we’ll have all these incredible stories and memories, and yours will be right at the top of it all”. Say what you will about Neville Chamberlain, he didn’t get on his knees and kiss up to the man across the table with sickening flattery. Witkoff and Kushner are now off to Kiev where I suspect the first topic will be to relay Trump’s demand that Ukraine stop bombing Russia’s oil refineries — because gas prices are affecting the mid-terms, and because it also hurts Putin’s feelings. The good news is that Ukraine has pretty much reached their strategic goal with respect to degrading Russia’s refining capacity. As long as Hormuz is closed they cannot substantially degrade it further, because two things could backfire. First the economy of their European backers could be badly hurt, second Putin may get desperate enough that he institute a general mobilization. So this is a perfect time for Ukraine to “give in” on the attacks on oil refineries – in return for something else (maybe they can get production licenses for Patriots). Anyway, for the next half a year, Ukraine needs all their drones and missiles to attack the supply chains for Russian missile production. Neither Ukraine nor Europe is quite ready to replace Patriots missile defense systems with their own better and cheaper systems. . Looks like we may he going unto the business of dictating foreign exchange rates: https://thehill.com/homenews/administration/6074097-trump-calls-canada-dollar-imbalance-unacceptable/ I’m not sure what a “currency imbalance” is, but we don’t like it. Absent clarification, I wonder what’s going to happen when fx trade starts in Asia in a few minutes. CAD to the moon? I’ve lately been yammering about press leaks being used to express Pentagon insiders’ discontent with the Iran war: https://econbrowser.com/archives/2026/09/the-blackest-black-box-mid-session-review-ever#comment-323786 Welp, the Washington Post is now yammering about it, too: “Military leaders warn Hegseth against extending Iran war operations” https://archive.ph/BjOon “Several U.S. military leaders have advised Defense Secretary Pete Hegseth that prolonging large-scale operations against Iran is* unsustainable and risks weakening their ability to confront threats elsewhere, including the U.S. homeland, according to people familiar with a recent assessment prepared for the Pentagon chief. “The warnings — detailed for Hegseth by the heads of the Army, Navy and Air Force and the four-star commanders overseeing U.S. operations throughout Europe, Asia and Latin America — appear in the Aug. 14 edition of the Secretary of Defense Orders Book (SDOB), these people said.” Again, we already knew about the substance of this report – that the U.S. military is running on fumes because of the Iran war. The discontent among Pentagon professionals reflected in leaks is, to me, the newsworth part. The war-criminal-in-chief’s refusal to put national interest ahead of his ego is leading professional soldiers to resist, formally and in press leaks. That’s good news. These are the same people who’ll be called upon to end our democracy in a couple of years; we want them in the habit of resisting. * “…operations against Iran is…” Has WaPo fired all of its editors?