BREAKINGVIEWS-Donald Trump erratically waves sword of Damocles

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin

WASHINGTON, Jan 21 (Reuters Breakingviews) - Donald Trump returned to the presidency swinging his pen wildly. Some 200 executive actions included efforts to end the U.S. offshore wind industry, roll back vehicle emission constraints, curb immigration and pardon 1,500 insurrectionists who stormed the Capitol on Jan. 6, 2021. The first-day agenda, however, stopped short of firing the opening shots of a promised worldwide trade war, leaving the threat hanging over the country’s trading partners and investors.

Initial relief weakened the dollar against affected currencies, but it then strengthened again following Trump’s remark that 25% levies on Mexican and Canadian goods would start Feb. 1. The stomach-churning volatility of his governance has returned, with the fate of economy-sustaining alliances and relationships subject to the mercurial leader’s whims.

The flood of new proclamations, many of which reverse Biden-era policies, are designed to overwhelm critics and, in Trump’s mind, enemies. While some legal groups immediately filed lawsuits, the administration has made clear it will not be thwarted by accusations of illegality.

One early test will be whether Apple AAPL.O and Google GOOGL.O allow TikTok back into their app stores without a sale to a non-Chinese owner. The ban on the social network was initiated by Trump, passed by Congress, enacted by Biden and affirmed by the Supreme Court, rendering any executive order to the contrary legally meaningless. But if the courts can’t or won’t enforce it, questions will inevitably arise about the stability of the rule of law that makes the United States a preferred area to invest.

Trump also betrayed some hesitation on certain matters. An economy-wrecking battle over imports and exports is on pause, at least until more preparation is complete. His economic team is not yet in place, including the architect of his tariff strategy, Treasury Secretary-designate Scott Bessent. The sword of Damocles will eventually drop, however, unless the president’s concerns about border security and drug trafficking are addressed quickly.

Astute observers may be less swayed this time around by Trump’s most extreme bluster, including on trade, especially considering the more authoritative action he took on immigration and energy policy. Weaker U.S. growth, a fresh surge of inflation, higher unemployment – and their impact on stock and bond markets – will be of far greater concern. At this point, squeezing out some concessions would be the best outcome for Trump and investors alike.

Follow @Rubinations on X

CONTEXT NEWS

President Donald Trump on Jan. 20 signed roughly 200 executive orders, including to rename the Gulf of Mexico and end U.S. birthright citizenship, on the first day of his second term, and said separately that 25% tariffs on Mexican and Canadian imports would go into effect on Feb. 1.

A general blanket tariff on all U.S. imports, promised by Trump on the campaign trail, did not materialize, with Trump calling into question whether his administration will ultimately pursue it. “We may, but we’re not ready for that just yet,” Trump said.

(Editing by Jeffrey Goldfarb and Pranav Kiran)

((For previous columns by the author, Reuters customers can click on RUBIN/
gabriel.rubin@thomsonreuters.com))