This month, many investors feel dazed and confused. No wonder: as the US government flirts with another shutdown and President Donald Trump intensifies his trade war, indices of economic uncertainty have skyrocketed above even the 2020 pandemic or the global financial crisis of 2008.
But the uncertainty could get worse. For amid all the tariff shocks, there is another question hovering: could Trump’s assault on free trade lead to attacks on free capital flows too? Might tariffs on goods be a prelude to tariffs on money?
Until recently, the notion would have seemed crazy. After all, most western economists have long seen capital inflows as a good thing for America, since they have helped to fund its $36tn national debt and business. For instance, Elon Musk, Trump’s adviser, has benefited from Chinese investment, some of which is private.