European update – Trump seeks to calm fears

Auto-tariff delay temporarily appeases investors

Equity markets are marginally in the red again on Thursday, with US futures in a similar position, as investors continue to weigh up the ongoing trade war threat for the global economy and markets.

Source – Thomson Reuters Eikon

It’s been quite the couple of weeks on the trade war front. We’ve gone from a deal being close to done, to talks collapsing and tariffs imposed and now Trump seeking to alleviate market concerns. The sell-off on Monday clearly lit a fire under the President who likes to make it known that he follows the markets closely.

His initial response was to soften his tone on Sino-US talks, referring to them as a “little squabble”, and now he’s correctly deemed it not wise to embark on trade wars on multiple fronts, likely out of fear of what impact it will have on markets and his ratings ahead of an election year. The decision to delay auto tariffs – directed at the EU and Japan – by six months has brought some calm to markets but it won’t be enough to ease concerns altogether if the conflict with China continues to heat up.

It’s also become clear – on a less positive note – that the experience of a trade war with China hasn’t deterred the Trump administration from this hostile and potentially damaging method of improving trade terms between the US and its partners. While we can all breathe a sigh of relief that we’re not going to see trade wars on multiple fronts, the battle has merely been postponed.

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