are reasons to think that the worst may be already behind us and that the higher rates/higher USD trades will soon resume. We make our case in the following sections. s Trade wars: near-term risk drops Developments over the past three weeks have led us to conclude that the risk of trade wars with Mexico and China has abated significantly, at least for the short-term: ¢ China: We take some comfort in the fact that the only item in his 100 day plan that President Trump has reneged on is his promise to label China as a currency manipulator on his first day as president (Table 1). In his interview with the WS) on January 13, Trump said that he “would talk to them first”. He added: “Certainly they are manipulators. But I’m not looking to do that.” This and the fact that Trump changed tack on Taiwan last week by telling the Chinese president he would honor the “One China” policy suggest to us a pragmatic approach to dealing with China. * Mexico: We are relieved by the climbing-down by the administration after the Mexican president cancelled his trip to Washington over Trump’s insistence that Mexico pay for the wall. Reince Priebus, the influential White House Chief of Staff, suggested that there is a “buffet of options” to pay for the wall, including by going after the drug cartels. The Mexican foreign minister welcomed the overture by saying that “It's a signal that ... must be welcomed because we are already seeing how the discussion is changing”. Table 1: Trump’s 100 day plan (On the first day of my term of office, my administration will immediately pursue the following): A hiring freeze on all federal employees to reduce the federal workforce through attrition Done A requirement that for every new federal regulation, two existing regulations must be eliminated. Done A five-year ban on White House and Congressional officials becoming lobbyists after they leave government service. Done A lifetime ban on White House officials lobbying on behalf of a foreign