Amidst all the chaos, all the noise and all the nonsense, stocks are surging.
The reason is simple, a little light has found its way through the clouds as a heavy finger was lifted off the ongoing trade wars battle, resulting in a short term sigh of relief.
It seems that with each passing week, the world descends further and further into isolation, as President Trump takes a strong armed approach in trade talks, issuing tariffs and hammering down on trading partners.
This should come as no surprise to anyone that has been following the news, or even the 2016 elections, as this is exactly what he said he would do.
What is surprisingly, however, is that he is actually doing what he said. A rare occurrence for any politician. Whether or not you agree with these actions, is purely in the eye of the beholder and widely disputed.
Over the past few months, we have seen tariffs imposed on China, Canada, the European Union and various other countries, all in the hopes of securing better trade deals for the United States, which in President Trumps opinion, has been getting the raw end of a deal for far too long.
I am not entirely sure about this, however, he is once again bewildering his critics as he deploys the art of the delay. Making irrational demands and over asking, a common tactic of his, and one that still eludes many, despite it being plainly written in his book.
This has once again worked, this time with the EU, as he threatened earlier in the week to impose a massive 25% tariff on foreign car imports, an action that would of crippled many sectors of the auto sector around the world.
If it was anyone else, the EU would of simply laughed this threat off, however, given the completely unpredictable nature of President Trump, this move sent them scrambling, hoping to avoid a disaster.
Concessions were made as European Commission President Jean-Claude Juncker worked to reach a resolution and agreed to many of the terms laid out by the President, while gaining a few wins of his own along the way.
In a joint press conference, he had the following to say;
"We agree today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods."
With the EU showing this sign of weakness and curtailing its "resistance" talk, you can expect other countries, such as China, and Canada to begin to second guess their own actions and possibly make concessions as well, however that is not today.
The reality is that the United States is still the economic engine of the world and Trump knows this, he knows that he wields a massive trade hammer, that has the ability to send any country into a deep recession. Something that any world leader hopes to avoid.
Still, this does not come without ramifications, as these moves are costing the United States and hurting domestic businesses in the short term, especially those located in the agriculture space.
Hoping to curtail some of this pain, President Trump is planning a "bail-out" for farmers in the tune of roughly $12 billion dollars. Hoping to alleviate some of the pain, until this storm passes.
Meanwhile, China has also announced another stimulus of their own, escalating this "game of chicken", as both countries fire shots back and forth.
These trade wars have the potential to rapidly descend into a full blown currency war, as countries print money out of thin air, hoping to mitigate some of the damage being done.
Damages that could have long term and dire consequences as these trade wars ebb and flow, around the world, with no clear sign of an end in sight.
- Source, as first seen on the Sprott Money Blog
Damages that could have long term and dire consequences as these trade wars ebb and flow, around the world, with no clear sign of an end in sight.
- Source, as first seen on the Sprott Money Blog
