Trump’s recent economic decisions and his sanctions against Russia and Iran gave the dollar a boost in the foreign exchange market. Russia’s central bank doesn’t like Trump’s policies. Russia’s central bank just got rid of more than $100 billion in U.S. Holdings so they could buy euros and yuan for their reserve stash.
That major shift in financial strategy is a direct response to Trump’s sanctions, according to Bloomberg News. The Russian bank moved more than $40 billion each into Chinese and European currencies in the second quarter of 2018, according to Bloomberg. The Russians also invested $21 billion in Japanese Yen.
Russia now owns 10 times more yuan than any other central bank in the world. In fact, Russia owns 25 percent of the world’s yuan reserves, according to data from the International Monetary Fund. Morgan Stanley told Bloomberg Russia bought more Chinese bonds than any other nation in 2018.
According to the director of international economics at the Council on Foreign Relations in New York, Benn Steil, Russia wants to protect its assets from United States restrictions. Trump’s sanctions in 2018 hurt the ruble. Putin thinks Trump could cut Russia off from the global payment system. In order to protect their currency, Russia dropped more than $80 billion U.S. Treasury notes last year, according to United States data.
Trump’s economic muscle may look great to the nationalists who support him, but his geopolitical decisions have a direct impact on global financial stability, and that kind of power scares a lot of economists around the world. China and Europe are also queasy about Trump’s plan to leave its allies gasping for financial breath. Ditching the dollar seemed to be the battle cry of Russia, China, and the European Union in 2018. That’s not good news for the United States, according to Mr. Steil.
The fact that Russia and China are selling U.S. Treasury notes doesn’t make news headlines. But it should, according to financial experts. Trump’s trade war with China and his on again, off again, relationship with Russia creates issues that seem irrelevant until they become real threats. Those threats may surface in 2019, and when they do the U.S. economy will take a hard financial hit.
Financial experts don’t like Trump’s borrow and spend philosophy. The national debt will hit an all-time high during Trump’s presidency. The government needs to sell treasury notes to big buyers, but Trump seems to scare those buyers away.