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European update – Trump seeks to calm fears

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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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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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