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World markets take a tumble amid trade war concerns

The price tag of Making America Great Again

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

US President Donald Trump’s policies aimed at ‘making America great again’ openly include the waging of a trade wars against not only America’s trade partners, but also the rest of the planet.

The tariffs regimes levied by Washington have heavier and lighter effects on different markets, depending on their domestic and regional economic situations, but are being met with retaliatory tariffs from nations the world over, from Japan to India to Canada and many in between.

The biggest players, Europe and China, are facing the largest battles with Trump over his tariffs, which seek to score a ‘win’ for America by losses incurred by its partners.

As noted recently relative to the oil market, price volatility is a consequence of this kind of trading policy, making it harder for suppliers to gauge supply conditions. But market volatility isn’t restricted merely to oil, as purchasing interests become further affected by uncertainty surround both supplies and prices.

The Gulf Times reports:

World stock markets faltered yesterday as traders eyed looming trade wars and worried about EU rifts over migration.

Spreadex analyst Connor Campbell said that “the latest twist in the US-China tariffs tiff last Friday continued to define trading”.

Frankfurt underperformed EU peers “with political tensions in Germany rising over an argument about migration”, noted Campbell.

The euro stabilised versus the dollar after falling to 11-month lows on Friday.

Tokyo earlier closed down almost 1%, while Shanghai and Hong Kong were closed.

Fresh fears of a trade war between the world’s top two economies have emerged after the United States and China imposed tit-for-tat tariffs on billions of dollars of imports.

Weakness in stock markets came “amid festering global trade concerns after the US and China traded tariff announcements last week,” said analysts at the Charles Schwab brokerage.

US President Donald Trump’s decision last week to hit China with 25% levies was met with an immediate retaliation, moving the two closer to a trade war that could potentially batter the global economy.

The announcement came despite weeks of talks between the two sides.

The developments had already sent stocks into the red across Europe and on Wall Street Friday, and the weaker trend continued on both sides of the Atlantic yesterday.

London’s FTSE 100 was flat at 7,631.33 points, Frankfurt’s DAX 30 lost 1.4% at 12,834.11 and Paris’s CAC 40 was down 0.9% to 5,450.48 points at close yesterday.

In Europe, investors were also looking ahead today, when French President Emmanuel Macron heads to Germany for talks with Chancellor Angela Merkel.

Merkel and Macron both agree on the need for a Europe-wide response to migrants, and are hoping to hammer out a policy acceptable to all member states that would ease the burden on Italy, Greece and other main entry points.

Hardliners in Merkel’s conservative bloc meanwhile gave her a two-week ultimatum to tighten asylum rules or risk pitching Germany into a political crisis.

With traders fleeing to safer assets, the yen rose against the dollar.

Brent crude meanwhile rebounded after slumping last week, as investors fret over Russia and Saudi Arabia’s expected agreement to ramp up output at an Opec meeting that starts on Friday.

The two major producers have kept a ceiling in place since late 2016, which has helped ease a supply glut and lift prices from multi-year lows.

Benjamin Lu, a commodities analyst at Phillip Futures Singapore, said crude may soon be weighed down by trade war fears.

“We expect for global trade tensions to weigh on prices sporadically as populist sentiments pervade the financial markets,” he noted.

“Enhanced volatility can be expected… as markets worry about the prospect of weaker trade activity, with economic battle lines being drawn.”

But Trump is serious about his perspective on the issue, as it appears to be singly devised to combat trade deficits in the name of national security.

The G7 had as a key part of its mission the efforts to curb the very sort of protectionist policies that Trump is leading in the Western world, and that effort was something that Trump refused to cooperate in.

Almost every single major economy policy meeting in recent months has had as its aim the preservation of multilateralism and combatting protectionism, all seemingly taking aim at Donald Trump for his tariffs and sanctions threats.

His policies are creating an atmosphere of uncertainty as well as increasing the costs of goods and raw materials the world over through his tariffs which seem to be aimed at creating a better condition for American labour, but which in reality appears to be achieving a quite different outcome: isolating America from its allies, instigating trade wars, increasing costs, and decreasing consumer purchasing power and investor’s confidence.



The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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Vince Dhimos
Vince Dhimos
September 5, 2018

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