Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Seven Takeaways From The US Tariff Escalation

Courtesy of ZeroHedge. View original post here.

By Steven Englander, head of Global G10 FX at Standard Chartered

  • We were surprised that the escalation occurred so rapidly but not that the US decided to press its advantage (see Questioning Friday's market optimism).  

  • The US announcement was likely partly triggered by the desire to maintain momentum going into mid-term elections. Hearings on the tariffs will likely be held in late August, the final list announced in early September, with implementation even later. Any price impact would probably not appear before the elections, allowing time for negotiation.

  • Moreover, the inflation impact is not large. In addition, the CNY has depreciated by almost 7% from its recent highs – this is probably enough to offset the price impact of the announced tariffs.

  • China seems surprised by the speed of the follow-up. Allowing the market to weaken the CNY overnight may be the path of least resistance.

  • Investors anticipate a major reaction from China. If China stops at tariffs on goods (keeping in mind that the US exports about USD 130bn annually to China, less than the USD 200bn of goods that the US will tariff) there will likely be a relief rally. The negative market reaction will probably be stronger, if China responds with heavy non-tariff measures to match the impact of the US measures.

  • The market reaction outside of Asia is more muted than earlier responses to tariff announcement, because: (1) it seems clear that this will be a longer process, (2) export substitution outside of China may occur, and (3) the US domestic economy seems on solid footing. It is possible and even likely that more issues will emerge with Canada over autos and with other regions. We do not interpret the limited non-Asia reaction as a signal that further escalation will be innocuous.

  • Within G10 FX, commodity currencies appear to be most vulnerable. The EUR has held up reasonably well – the euro area is not as exposed as Canada to escalation of trade tensions. In the short term the Bank of Canada’s framing of trade risk will likely drive the CAD.


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!