Trump decided to impose 10% and 25% tariff on imported steel and aluminum, respectively, from EU, Canada and Mexico. US tariffs set off a domino effect.
Markets are afraid that a new global trade war is looming as Canada and Mexico have already announced their counter-measures. Equal tariffs on various products – such as orange juice and bourbon – imported from the States are among such measures. Moreover, Canada announced that will challenge such tariffs under NAFTA and WTO.
EU threatens tariffs as well as planning to bring its case against new U.S. tariffs before the World Trade Organization. The French President characterized the U.S. decision “illegal” and a “mistake” that could even lead to a war, recalling pre-WW2 period.
World Trade Organization expressed “very real concerns” as well.
Analysts say that Trump’s move aiming to protect US industry, within the “America FIRST” context, may cause a boomerang effect. Trump during his presidential campaign promised to take measures against trading partners who “take advantage of poorly negotiated trade agreements”.
Trump had previously offered Canada and Mexico a permanent exemption from the steel and aluminum tariffs if they agreed to U.S. demands on NAFTA.
MARKETS hit by US Tariffs
The US Dollar inched up against its major-traded rivals.
The Sterling traded flat against US Dollar, following strong UK data, in a six-month low. The pound increased slightly against the common currency.
The Euro also was flat vs the greenback. On a weekly outlook it was slightly recovered following six weeks of losses.
Oil prices remained almost unchanged ahead of OPEC meeting outcome and US supply increasing.
Gold prices were almost steady due to slackening demand and world trade tensions. Silver also dived due to muted demand. Analysts expect that the precious metal will climb higher as instability boosts safe-haven demand.
Sources: Reuters, Euronews, Time, Bloomberg
PLEASE NOTE The information above is not investment advice.