As I said, it is fueled with ignorance and I’m sure that it is complete bullshit when examined closely but the reason I kind of find it possible is that currently the American companies have a reach that is order of magnitude bigger than the American population and their valuations as well as their profits are based on that. What America is currently doing is dismantling of the world order that made this possible, therefore the American companies will have drastically reduced reach, i.e. Apple for example, won’t be able to sell hundreds of millions of iPhones per quarter because there are not that many Americans to buy that. Instead of the Market crashing in nominal values, maybe the value of the dollar we will crash. So Apple will still be $4T but an new iPhone will be $10K.
Yes, I’m just throwing some bs numbers around but IMHO things will have to make sense eventually when US can’t just print infinite dollars without crashing its value and Apple can’t just sell iPhones to the entire planet due to wars and trade barriers that are becoming the new normal.
You're not wrong in theory. If you're a small country, your currency's day-to-day purchasing power is influenced strongly by your imports and exports. If you have few things other countries want to buy, there's less demand for your currency, and it will go down in value as expressed in your trade partner's currency. A sustained trade deficit (more imports than exports) might mean your currency goes down and down in value. Certainly if some politicians decide to close the borders, you will export even less, but will probably still need some necessities from abroad, and you have a financial crisis.
The US is a huge whopping exception to this strong correlation between the balance of trade and currency strength. US exceptionalism is usually wrong, but in this case, the US dollar being the 'reserve currency' of the world is an incredible boon. The US has been able to sustain a huge trade deficit for decades without sky high inflation (you think it's bad now, it's nothing). In fact, foreign goods keep getting cheaper and the US dollar and services keep getting more valuable. A lot of this is because foreigners are willing to keep their savings invested in dollars (stocks & bonds, including the magnificent 7) rather than selling off their dollars to buy e.g. Chinese goods.
Also note that the tech companies make up a small portion of imports/exports.
But.. If trade restrictions (or security concerns) make it harder for the magnificent 7 to make money abroad, their profits will go down and there could also be an outflow of capital that puts inflationary pressure on the dollar, just because US stocks and bonds are less attractive - the trade deficit increasing would also contribute a bit, but it would be a much smaller effect.
An economy being propped up by foreign capital is not just a US phenomenon, the Asian Financial Crisis of 1997, Turkey 2000, Mexico 1994 - these crashes all were cause by sudden capital outflows. The proximate cause was a short term arbitrage trade, rather than those currencies being in extensive (structural) demand.
This concern is also why China doesn't let foreigners invest directly in Chinese companies. You can only buy weird derivative certificates that trade on a Hong Kong exchange and are subject to tight capital controls if need be.
Things like a domestic tax on imported goods/services (also called tariffs) are unlikely to lower the trade deficit unless there is already an industry domestically to absorb the demand.
As I said, it is fueled with ignorance and I’m sure that it is complete bullshit when examined closely but the reason I kind of find it possible is that currently the American companies have a reach that is order of magnitude bigger than the American population and their valuations as well as their profits are based on that. What America is currently doing is dismantling of the world order that made this possible, therefore the American companies will have drastically reduced reach, i.e. Apple for example, won’t be able to sell hundreds of millions of iPhones per quarter because there are not that many Americans to buy that. Instead of the Market crashing in nominal values, maybe the value of the dollar we will crash. So Apple will still be $4T but an new iPhone will be $10K.
Yes, I’m just throwing some bs numbers around but IMHO things will have to make sense eventually when US can’t just print infinite dollars without crashing its value and Apple can’t just sell iPhones to the entire planet due to wars and trade barriers that are becoming the new normal.
You're not wrong in theory. If you're a small country, your currency's day-to-day purchasing power is influenced strongly by your imports and exports. If you have few things other countries want to buy, there's less demand for your currency, and it will go down in value as expressed in your trade partner's currency. A sustained trade deficit (more imports than exports) might mean your currency goes down and down in value. Certainly if some politicians decide to close the borders, you will export even less, but will probably still need some necessities from abroad, and you have a financial crisis.
The US is a huge whopping exception to this strong correlation between the balance of trade and currency strength. US exceptionalism is usually wrong, but in this case, the US dollar being the 'reserve currency' of the world is an incredible boon. The US has been able to sustain a huge trade deficit for decades without sky high inflation (you think it's bad now, it's nothing). In fact, foreign goods keep getting cheaper and the US dollar and services keep getting more valuable. A lot of this is because foreigners are willing to keep their savings invested in dollars (stocks & bonds, including the magnificent 7) rather than selling off their dollars to buy e.g. Chinese goods.
Also note that the tech companies make up a small portion of imports/exports.
But.. If trade restrictions (or security concerns) make it harder for the magnificent 7 to make money abroad, their profits will go down and there could also be an outflow of capital that puts inflationary pressure on the dollar, just because US stocks and bonds are less attractive - the trade deficit increasing would also contribute a bit, but it would be a much smaller effect.
An economy being propped up by foreign capital is not just a US phenomenon, the Asian Financial Crisis of 1997, Turkey 2000, Mexico 1994 - these crashes all were cause by sudden capital outflows. The proximate cause was a short term arbitrage trade, rather than those currencies being in extensive (structural) demand.
This concern is also why China doesn't let foreigners invest directly in Chinese companies. You can only buy weird derivative certificates that trade on a Hong Kong exchange and are subject to tight capital controls if need be.
Things like a domestic tax on imported goods/services (also called tariffs) are unlikely to lower the trade deficit unless there is already an industry domestically to absorb the demand.