Greg Gibbs, Analyst at Amplifying Global FX Capital, suggests that it is difficult to assess the impact of the various trade policy actions by the USA as much of the US moves are threats or proposals that may be used as bargaining chips in long-lived negotiations.
Key Quotes
“During the negotiation phase there may be little net impact on global trade flows, and in turn global economic activity.”
“Market attention to the threat of trade wars may ebb, and investor confidence may be buoyed by ongoing solid global growth.”
“On the other hand, the difficulty in predicting the next moves by global leaders, in particular, the fast pace of statements from Trump and often conflicting views of his advisors may keep global investors on edge. Companies around the world may slow their investment plans due to uncertain future economic and trade relationships.”
“It does appear that the US President has a high priority of increasing the US’s trade advantage. We should continue to expect a stream of trade-protectionist threats from the US. These are likely to be aimed at China, the EU, and its NAFTA partners. But the fallout can be much wider.”
“These threats have had a mixed impact on global markets. At times it has appeared to weaken the USD on views that the US is becoming more isolated, its hegemony is diminishing, it risks losing the reserve status of the USD, and other regions will seek stronger trade relations that exclude the USA.”
“At other times it has supported the USD on views that it will increase investment in US production capacity, boost US industry and dampen industry in countries that export to the USA. It has raised inflation and rate hike expectations in the USA. And It has undermined confidence in global growth, especially for countries that have a high share of GDP dedicated to the traded goods sector; resulting in weaker emerging-market assets.”
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