US vs China. Then US vs Canada and Mexico and EU. Canada and Mexico and EU vs US. Tariff conflicts escalate on a global level to a tariff war.
In May trade talks between China and the USA did not have a specific outcome. Apart from a Joint Statement putting Sino-US trade war on hold, at least temporarily, there is no development. Joint Agreement set the framework for taking measures to reduce the US trade deficit in goods with China. The two countries delegations also reviewed Intellectual property protection which seems to be the heart of the controversy.
Recently Trump decided to impose 10% and 25% tariff on imported steel and aluminum, respectively, from EU, Canada and Mexico. The response on the part of once US allies was instant.
Trump’s tariffs, however, hit the US economy and politics as Canada, Mexico and EU countermeasures make the situation more problematic. Mexican tariffs may hit American apple growers in Washington state, cheesemakers in California and pork producers in Iowa and Colorado. This means that Republicans are to face a great problem with their voters in these states. Investments of more than 2.5 billion in US renewable energy froze as Trump imposed tariffs in the imported solar panels.
G7 summit which starts on Friday, 8th of June, will include the Washington’s tariff decision in its unofficial agenda for sure.
The dollar index dropped 0.4%, to the lowest since the 22nd of May, and weakened against its major-traded rivals. Particularly Yen and the Sterling regained some of their profits against US dollar.
The Australian Dollar moved lower 0.2% against US dollar after hitting a new six-week high in the previous session.
New Zealand Dollar got closer to one-month high, at $0,7045.
The Sterling also hit a two-week high as US Dollar weakened. However concerns over Brexit restricted gains.
The Euro hit a two-week peak, following ECB Praet’ s comments that the ECB would debate next week whether to end bond purchases later this year. The single currency rose 0.5% in its fourth straight session of gains.
Oil prices soared as concerns over a fast fall in OPEC member Venezuela’s exports.
Sources: Reuters, Euronews, bbc.com
PLEASE NOTE The information above is not investment advice.