MacroVoices #464 Michael Every: Lines on Maps vs Lines on Screens
Rabobank strategist Michael Every discusses how Trump's return to presidency will bring massive volatility as he shifts from traditional economic policy to 'economic statecraft' - using economic tools to achieve foreign policy and national security goals rather than just economic targets.
Summary
Michael Every, global strategist at Rabobank, argues that Trump's second presidency will usher in an era of extreme volatility as markets grapple with a fundamental shift from economic policy to economic statecraft. He distinguishes between economic policy (using economic tools for economic targets like 2% inflation) and economic statecraft (using economic tools for foreign policy and national security goals). Every contends that Trump's tariff threats and aggressive stances on Canada, Mexico, Greenland, and the Panama Canal represent a return to pre-WWII American grand strategy focused on maintaining primacy through re-industrialization and supply chain control.
Every explains that the post-Cold War grand strategy of free trade and American hegemony has collapsed, leading to rising inequality, de-industrialization, and geopolitical challenges from China, Russia, Iran, and North Korea working together. He argues Trump's approach follows Machiavelli's principle that it's better to be feared than loved, already achieving results without military action - Greenland discussing independence, Canada likely addressing border issues, and Panama auditing Chinese companies at the canal.
Regarding China, Every believes Trump wants to maintain American primacy while forcing China to accept its place in the hierarchy. He sees the current situation as a chess game where pieces are being moved without major exchanges yet, but warns of potential spheres of influence emerging if grand bargains cannot be reached.
For Europe, Every predicts a split response based on class lines (middle class pro-Democrat, working class pro-Trump) and structural challenges. He cites his 2023 analysis showing Europe could face a Greece-like scenario with higher input costs, currency weakness, and reduced exports if geopolitical tensions continue.
For markets, Every identifies the US dollar as the key pivot point. He warns that if Trump succeeds in re-shoring manufacturing and reducing trade deficits, dollar flows to the global economy could dry up, causing the dollar to surge, commodities to crash, and creating divergent market outcomes by country and sector. He emphasizes that traditional economic models assuming mean reversion won't work in this new paradigm of economic statecraft.
Key Insights
- Michael Every argues that Trump's presidency represents a shift from economic policy to economic statecraft, where economic tools are used to achieve foreign policy and national security goals rather than purely economic targets
- Every contends that the post-Cold War grand strategy of free trade and American hegemony has collapsed, leading to rising inequality, de-industrialization, and coordinated opposition from China, Russia, Iran, and North Korea
- The strategist claims Trump has already achieved geopolitical results without spending money or using force - Greenland discussing independence, Panama auditing Chinese companies, and allies likely addressing border and defense spending issues
- Every predicts that Trump's approach to China aims to maintain American primacy by forcing China to accept its place in a hierarchy, rather than seeking complete economic decoupling
- The analyst warns that successful American re-industrialization could cause dollar flows to the global economy to dry up, leading to dollar strength, commodity crashes, and divergent market outcomes by geography
- Every argues that Europe faces a potential Greece-like scenario with higher input costs, currency weakness, and reduced export capacity if geopolitical tensions continue without massive government investment
- The strategist claims that traditional economic models assuming mean reversion will fail in the new paradigm, as countries may face permanently higher input costs and reduced export opportunities simultaneously
- Every suggests that if Trump implements tariffs with delayed implementation (T plus one scheme), it could drive industrial investment as companies prepare for higher trade barriers
- The analyst contends that central banks may need to finance military and industrial spending during this transition, potentially keeping rates low despite inflation, similar to wartime policies
- Every argues that the current situation resembles a chess game where major powers are positioning pieces before potential major exchanges, with spheres of influence as a possible fallback outcome
- The strategist claims that Trump's threats about Greenland, Panama Canal, and North American trade relationships represent a return to Monroe Doctrine-style hemispheric control as a prerequisite for global power projection
- Every warns that markets will experience unprecedented volatility as they navigate between countries and sectors that benefit versus suffer from economic statecraft policies, requiring much more granular analysis than traditional macro trends
Topics
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