That’s from GS yesterday. Question: Should one stock up on ibuprofen, because I anticipate a lot of headaches coming. Asking for a friend.
Of the $17.8 bn increase in imports, $20.9 bn were accounted for by imports of pharmaceutical preparations, according to the March release.
or they are anticipating a lot of headaches during Trump’s second administration
Off topic – a finance story with a handful of moving parts.
As we all know, the dollar has lost a bit of its luster this year:
https://www.tradingview.com/symbols/TVC-DXY/?timeframe=12M
A popular explanation is that the dollar has lost some safe-haven value due to policy risk in, and emanating from, the U.S.:
https://econbrowser.com/archives/2025/04/dollar-dominance-no-more
The loss of safe-haven value may be seen in rising U.S. soverign default risk:
https://econbrowser.com/archives/2025/04/two-pictures-on-the-usd-as-safe-haven-asset
There is another sudden change in U.S. financial markets resulting from policy uncertainty; M&A activity has fallen off a cliff:
https://www.rte.ie/news/business/2025/0506/1511296-global-m-s-activity/
What might that have to do with the dollar? One thing that drives FX flows is asset issuance. In order to buy new assets, one turns bank accounts in one’s home currency into bank accounts in the target investment currency. Fewer U.S. deals means fewer new dollar-denominated assets to invest in.
Wanna know where there are new corporate bond issues to buy? In the EU. Here’s Marketplace on the shift in U.S firms’ issuance to Europe due to lower borrowing costs (thank you, ECB):
https://www.marketplace.org/story/2025/05/07/why-more-american-companies-are-issuing-eurobonds
So what we have right now is a special circumstance in which LOWER rates, by driving increased issuance, attract foreign exchange flows. And what do you know, here’s Thorsten Slok on the recent flip in the dollar’s foreign exchange value relative to interest rate differentials:
https://www.apolloacademy.com/after-liberation-day/
The divergence Slok demonstrates can reflect a loss of safe-haven value, greater investment opportunity outside the U.S., or both. Right now, it looks like both, plus quite possibly one more factor. Forgive me, oh gods of efficient markets, but if one suspects further decline for the dollar in FX market, then shifting away from dollar-denominated assets offers the hope of surplus returns.
The broad dollar was down 8% in Q1, which annualizes to over 24%. It’s hard to make that kind of return on a diversified portfolio, but switching from U.S. assets to global assets on January 1 would have done it. It’s just really tempting to think more surplus gains are possible.
Why this wordy, twisty story, much of which is not new? Take a look at the dollar index, day by day. Stocks down, bonds down, dollar index down. Stocks up, bonds down, dollar index down. Stocks down, bonds up, dollar index down. The dollar isn’t down every day, but most days it is, and performance in other markets seems to matter less than usual. Seems like lots of things are changing to make this happen. Seems like the people causing dollar weakness aren’t keeping up.
We need pgl to chip in here. Ireland “manufactures” pharmaceuticals, but do they actually make them? I assume these are real physical imports, but why pharmaceuticals massively above everything else, when most imported goods face rising tariffs?
Is it because profit margins in the U.S. drug market are vastly higher than for most other goods, and that tariffs make a bunch of that margin evaporate? Remember, the profit has to be booked in Ireland for tax reasons, so the mark-up comes before importation. Does the margin on drugs make a big rise in transportation and warehousing costs affordable in a way they are not for other goods?
Bernie, Elizabeth and Alexandria would like to know.