Understanding Donald Trump

Trump's announcements can be explained by four factors:

1) Trump craves attention from individuals and the media.

2) Trump's negotiation style is to make bombastic announcements — even if they are not based on facts or are nonsensical — in order to force the other side to compromise.

3) Trump attaches greater importance to the appearance of announcements than their substance. The trade agreements with Japan and the EU included wording about an increase in investments in the United States. Yet such decisions belong mainly to the private sector, over which the government has little influence.

4) Trump is said to have a short attention span and to lose concentration quite quickly. When he is tired or annoyed, he will tend to throw a tantrum and make some of his most outrageous statements.

After Trump makes such statements, members of his administration scramble to do damage control — this is often undertaken by U.S. Treasury Secretary Scott Bessent.

This predictable pattern of behaviour is the reason why investors who have ignored the noise from Trump's declarations have fared better than those who made decisions based on his latest comments or statements.

Indeed, the only entity which holds all the cards and can force any government into submission is the financial markets. They can push long-term interest rates higher or drive currencies lower until the economic pain threshold is hit — at which point no legitimate government can resist.