3. Critically, the rise of relative competitiveness of the US:
a. In our article on March 4, 2024, titled “Secular decline in ringgit’s value due mainly to falling relative competitiveness — a result of decades-long poor government policies”, we explained at length the Balassa-Samuelson effect. That countries with higher productivity growth in the tradeable goods sector will see their currencies appreciate in the long run.
b. The gist of our article on Aug 18, 2025, “Trump wins the trade war — and the advantage of future US relative productivity gains” and the sidebar, “Trumpianomics will benefit the US greatly for years to come”, is that the substantially higher private investments to come will lead to US making big gains from productivity growth (especially from artificial intelligence). Yes, consumption in the US will fall (leading to global economic slowdown) for savings to rise (effectively keeping both domestic and international longer tenor interest rates high).
c. The above plus a falling trade deficit MUST lead to a stronger USD — as we have consistently argued writing on the MAGA Pathway.
d. This was made possible because Trump was uniquely (among global political leaders) able to sell to the majority of American voters a story where the net effect is short-term pain from higher prices (due to tariffs) for investments in the future that will generate long-term gains in competitiveness.
1. The US is clearly NOT the most indebted nation (see Chart 4 in our main article).
2. The hegemony of the USD persists and the perception of safety. In a world of financial upheavals, global investors will again revert to USD and US financial assets for security and liquidity (trust in US institutions and outperformance of US companies and economy).
