Is Donald Trump stirring the pot again or perhaps tidying up his mess? For now, Trump has decided not to stir up trouble in his backyard as the trade war is only escalating.
Donald Trump has ignored previous agreements on tariff concessions for Australia. The Australian dollar is currently maintaining gains driven by initial negotiations between the US president and Australian prime minister. However, the tariffs on steel and aluminum imposed overnight pose a double risk to the Australian currency.
The American president has once again demonstrated his unpredictability. General tariffs on imports of steel and aluminum to the USA will come into effect on March 12, “without exception or exclusion,” announced Trump shortly after the Australian Prime Minister bragged that the US president would consider relief for his trading partner.
– Markets have somewhat gotten used to D. Trump’s madness during his first term, but this time he started using tariffs more for negotiation play – states in a conversation with MarketNews24 Maksymilian Kuch, a stock market analyst at XTB. – We are currently witnessing that he will use a strategy of showing his strength before negotiations begin, imposing the highest tariffs on the opponent.
Trump has already made a series of decisions, generating significant volatility in financial markets. The initial effects were such that the US dollar gained, stock indices lost, oil gained, and gold reached new historic highs.
However, it was later found that the new tariffs on the United States’ closest neighbors would not come into effect immediately but would be delayed by a month. Trump knew that such broad tariffs would be challenged by the Supreme Court, but he wanted to force his partners to submit. From this perspective, it can be concluded it was a brilliant move. There is hope that inflation will not increase, GDP will not be reduced, although uncertainty in business will continue. Still, it may be difficult to achieve Trump’s goal of returning production in many sectors to the United States.
Tariffs imposed on China are expected to be 10% on all products, but Trump earlier indicated they could rise to 60%. At the same time, talks with China are to be held about the delay of tariffs. China is retaliating. They impose a 15% tariff on coal and LNG, which are key from the perspective of US exports. Plus 10% on oil and agricultural equipment. China decides to put some US companies on the list of dubious contractors and start investigating Google.
In the long run, no trade war is justified, and its continuation could lead to a clear slowdown worldwide. Only after tariffs have been in effect for several weeks or months will it finally be possible to answer what impact they will have on the economy (a decrease in US GDP, higher inflation and more distant prospects for interest rate cuts) or ordinary consumers (a car that costs $35,000 will be $3,000 more expensive). The only thing that can be stated at this time is that the market will remain highly volatile and more significant moves can be expected.
– However, in the long term, D. Trump’s strategy is beneficial for the USA in that companies will move businesses to the United States because they will get an offer in the form of tax relief and subsidies – comments an XTB expert. – However, in the short term, investors are betting on black scenarios, quickly withdrawing from them after receiving new information. They are looking for safe havens and hence a new record in gold prices. Gold stocks are being transferred from London to New York, and waiting times for gold have extended to 4-6 weeks. Cryptocurrencies have begun to behave in a way correlated with stocks, which is also a particular situation.
For Poland, it may be significant that Trump is telling Ukraine that if it ensures the influx of rare earth metals from its territories to the United States, it can expect significant help in military equipment. It is worth mentioning that fights in Ukraine are happening in those areas that are critical from the perspective of resources.
Trump spoke with Putin on the phone and awaits a meeting in Saudi Arabia. However, during the conversation, the proposal for two meetings arose: in Moscow and Washington, which presently seems unlikely.
Although financial markets seem positive, the potential end or freezing of the war may not be very beneficial for Ukraine itself. At the end of the first half of February, it is worth noting the clear strengthening of assets in Europe. The Euro gains on a wide market, especially against the American dollar. EURUSD is again quoting levels over 1.04. The Polish zloty and the Hungarian forint are gaining. The EURPLN pair fell below the 4.16 level, while the USDPLN pair fell below 4.0. Strong increases can also be seen on European indices. DAX is reaching new historic highs. WIG20 is rising to the highest level since 2018.
Trump, a genius strategist or a madman? appeared for the first time in CEO Magazine.
