The turmoil in the financial markets launched by the radical prices of Donald Trump caused comparisons with the dilted chaos by the disastrous mini-budget of British Prime Minister Liz Truss almost three years ago.
The launch of the “Liberation Day” of the American president of a World Trade War And the unsuccessful tax reductions in unlikely truss have both frightened investors and threatened to disturb the financial system.
Given the economic power of the United States, Trump's determination to reshape the world economic order seems to have a much more lasting impact on the financial system than Truss, which was ousted after only seven weeks.
Much to Wall Street had initially applauded Trump's electoral victory in November when he gave himself up to the growth of Turbo load by developing the regulations, reducing bureaucracy and reducing taxes when he returned to the White House.
Since then, however, the president has given more financiers and regulators cause for concern only for celebration.
At the heart of these fears is the concern that an American protectionist administration, which deals with the main multilateral economic institutions, such as the IMF, the World Bank and the G20, with disdainwill fragment the global financial system.
“The current prices of the American administration are part of a broader program of economic nationalism and use such tools to pursue geopolitical objectives,” explains Lisa Quest, co-head of the government and practical public institutions for Europe in Oliver Wyman consultants.
A study Published in January by Oliver Wyman and the World Economic Forum, the estimated fragmentation could lead to annual economic production losses between $ 600 billion and 5.7 TN. At the top, this would mean to destroy 5% of world GDP – double production losses caused by the 2020 coronavirus pandemic.
“It is not only the real cost, but it is the cost of uncertainty and the impact on confidence,” explains Quest. “Many of these markets operate on the basis of stability and confidence and there will be an additional cost from the loss of this confidence.”
The recent decrease in the sharp drop in American equity prices, sales in treasury bills and a depreciating dollar suggest that the development of Trump's volatile policies is eroding Investor confidence And causing a capital flight outside American assets.
Jamie Dimon, managing director of the largest American bank Jpmorgan Chase, told FT in A recent interview That he was concerned about a potential threat to the traditional status of his country as “paradise” because of his prosperity, his rule of law and his economic and military force.
Trump was also alarming in the conference rooms of Target law firms who have represented his political opponents, launching large surveys on diversity policies in businesses and cut funding to major universities such as Harvard.
“Customers are seized by uncertainty and fear of reprisals,” explains Anna Pinedo, partner of the American law firm Mayer Brown, specialized in capital markets. “There is an hesitation in making investment decisions. Boards of directors and management teams are particularly afraid that they can be targeted due to the decisions they make. It is a very difficult climate to manage. ”
The financial system has proven to be resilient in recent years, which emerged largely unscathed from the net slowdown caused by COVVI-19 locking in 2020 and the energy crisis sparked two years later by the Invasion of Russia on a large scale of Ukraine.
Although this resilience was partly thanks to large quantities of government support in the form of loan guarantees, regimes and subsidies on leave, it also reflects how the banking system was made stronger thanks to reforms to increase the levels of capital and liquidity.
However, there have been several incidents which, according to the regulators, show that the system remains vulnerable to shocks, including the crisis in the British pension sector caused by the Mini-Budget of Truss in 2022 which led to a high sale on the country's bond market.
In 2023, higher interest rates caused the collapse of several medium -sized American banks, including Silicon Valley Bank, and Switzerland was forced to organize a hasty rescue from Credit Suisse by its UBS rival.
An imminent trade war threatens to add more pressure on the financial system. “While banks remain well capitalized overall and market movements have been ordered so far, they can be tested in the case of a full risk episode,” said Pierre-Olivier Gourchas, chief economist of the IMF, said In April, it announced a reduction in its growth forecasts for the global economy this year from 3.3% to 2.8%.
Higher public spending since the subsequent pandemic and energy crisis have greatly increased public debt levels, increasing the risk that investors question the sustainability of countries debt and trigger a sudden increase in borrowing costs.
There are also fears concerning high debt levels in other areas of finance outside the traditional banking sector which can make the system more vulnerable to shocks.
An example is increasingly popular with “basic trade” by hedge funds to use large quantities of money borrowed to take advantage of small differences between the price of cash obligations and constraint contracts on the US Treasury market.
S&P rating agency Global Ratings warned In April on the risks of the basic trade which collapses. “Given its obvious crucial importance for the global financial system, an unfavorable movement on the US treasury market, for example due to the deleveraging of the hedge funds, would have repercussions,” said S&P in a report, adding that it could cause funding costs through the financial system.
Meanwhile, a trade war, as well as military conflicts in Ukraine and the Middle East, increased the threat of cyberattacks against the financial system. The Bank of England warned in April that “higher geopolitical tensions also create an increased risk environment of cyber attacks, which could coincide with and amplify other stress”.
One of the greatest concerns is that Trump could Block the federal reserve From the provision of liquidity in dollars to the rest of the world via the exchange lines, it maintains with various other central banks, which acted as a key tool for the fight against the crisis in the past.
“There is no indication of the Fed that it could happen, but if the central banks could no longer count on these swap lines, it would be very serious,” said Andreas Dombret, former executive director of the German Central Bank.
Trump says he wants to further reshape the world economic order in the interest of the United States. But observers warn that this could turn against a shot by upsetting a system that Washington played an important role in shaping as well as to be one of its greatest beneficiaries.
The United States has already indicated that it could abandon the stricter capital rules for banks agreed by the global regulators of the Basel Committee on banking supervision in response to the 2008 financial crisis.
Sir Paul TuckerThe former vice-government of the BOE, said that the largest beneficiary of the 2008 crisis was China and warns that Beijing would be about to relearn an advantage again if fragments of financial regulation.
“If Basel takes place, all the banks that could come and dominate the world are the big Chinese – they have the giant state seated behind them and can therefore compete with levels of capital lower”, explains Tucker. “It's not good for Washington, or London, but it's not bad for Beijing.”
