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Trade war: After inflationary shock, Trump collapses ahead of China


economy trade war

After the inflation shock, Trump collapses ahead of China

| Reading time: 4 minutes

"The conflict will still form in the coming decades"

The US-China trade war is not quiet. Now US President Trump has moved his tariffs against China and that has also affected the markets. Dietmar Deffner in conversation with Jörg Krämer, chief economist at Commerzbank.

Surprisingly, the United States changed its tariffs against China. In the markets Trumps Volte caused a turn. But behind the sudden gentleness is perhaps a desperate act.

AWhen Apple CEO Tim Cook made a guest appearance in the White House in March, US President Donald Trump quickly named him Tim Apple. Cook made a face. The senior manager could now find Washington's newest Volte as a compensation for the slip of the tongue. Because this helps "Tim Apple" in particular.

Shortly before its planned entry into force, Trade Representative Donald Trump transferred the new tariffs to Chinese tea products technology products. The should not come now in September, but earlier in mid-December. Apple's stock was on fire immediately after announcing these plans and noted at the end of the afternoon six percent plus. This helped the technology swap Nasdaq to a strong jump at 2.6 percent.

But not only US tech stocks like Apple have benefited from the temporary easing in the trade dispute between China and the US on Tuesday. Around the earthly sentiment has turned on the financial markets. The German equity index (Dax) worked its way from minus to plus. If the stock market barometer scored more than one percent in negative territory in the morning, the index was almost 100 points higher than the previous day's trading position. The biggest winners were exports such as Daimler, Volkswagen and Infineon.

Source: Infographic WORLD

Trumps Volte also caused a turnaround in the business. Prices for oil and copper have risen sharply. Commodities are economically sensitive, so they are particularly affected by commercial voltages and therefore benefit from signals of relaxation.

"The wonderful decision of the Americans to suspend the tariffs is a positive counterpoint in a concert of bad news," said Andreas Hürkamp, ​​investment strategist at Commerzbank. He refers to the recent earnings warnings of large corporations and overall poor economic data. This morning the German consumer goods group Henkel revised its trading expectations low. ZEW's economic outlook, a widely acclaimed economic indicator, fell to -41.1 points, the lowest level since 2011. At that time, the euro debt crisis was nearing its peak.

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Experts are already speculating about what might be behind the sudden change of heart in the White House. The president may have inadvertently revealed the real reason on Twitter for a brief message. In it he wrote that tariffs on Chinese imports are a blessing for America and do not drive inflation.

In the afternoon, however, new prices for America became known. They showed an unexpected sharp rise in the core inflation rate. The rate, which excludes underserved food and energy prices, was 0.3 percent higher than the previous month and 2.2 percent higher year-over-year. That was the strongest rise in inflation this year.

Source: Infographic WORLD

Economists call the US inflation figures quite explosive. "The rise in consumer prices should not be completely ignored," said James Knightley, an economist at the Dutch bank ING. Overall, inflation appears to be semi-controlled, but such a strong rise in core inflation has not been expected in the form. "It has not happened since 2001 that core inflation will grow 0.3 percent, twice in a row, from month to month since 2001." This leaves us uncertain whether the US Federal Reserve will be able to deliver its reduced rate over the coming months.

And interest rate cuts are something of a magic potion for Trump for the election year 2020. Without a looming US monetary policy, the stock markets, which Trump has declared as the measure of his success, should no longer rise. Last but not least, he also needs lower interest rates for his expansionary economic policy. His administration has raised more than $ 867 billion in the first ten months of the current fiscal year than in the previous year. In the short term, the budget deficit is expected to exceed $ 1 trillion.

The change of rates can therefore be understood as an important tactical step towards achieving re-election in the coming year. And Trump is currently putting everything under this target. Whether that's an advantage of Tim Apple or not.

"Customs are effectively repealed by reducing change"

China continues to weaken its currency against the US dollar. US Secretary of the Treasury, Mnuchin, sees this as unfair business practices. What is the danger that the trade war will become a currency war? Economist Thorsten Proettel's estimate.

Source: WELT / Dietmar Deffner

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