A set of pictures shows why Trump is convinced he can win a trade war.
Germany is the global leader in exports as a percentage of GDP. It stands to lose the most in a global trade war.
Germany Exports as Percentage of GDP
Eurozone Exports as Percentage of GDP
UK Exports as Percentage of GDP
China Exports as Percentage of GDP
US Exports as Percentage of GDP
Assuming a uniform 10% collapse in global trade, here are the GDP impacts.
Percentage Point Hits to GDP
- Germany: 4.724 PP
- Eurozone: 4.408 PP
- UK: 2.826 PP
- China: 1.964 PP
- US: 1.189 PP
Pain Order
The hits would not be uniform, of course, and a 10% decline may be far too much.
However, the pain order is correct.
Pain Tolerance
Pain tolerance is important.
The US' biggest trade deficit is with China and China has the biggest pain tolerance.
The US has the least pain tolerance with elections every four years and one coming up in 2020.
Losing Less is not Winning
Losing less is not winning.
No one wins trade wars.
This is not 1960
Finally, this is not 1940, 1950, or even 1970.
Contrary to Trump's touting, the battle isn't about NAFTA or the WTO.
Unwinnable Trade War
China's inclusion into the WTO exacerbated the trade problems but did not cause them.
The roots of this crisis stem from Nixon closing the gold window in 1971.
Even if the US had a higher pain tolerance, the US cannot possibly win a trade war.
For discussion, please see Trump's Unwinnable Trade War: Gold Explains Why
This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.
Recommended Content
Editors’ Picks
USD/JPY holds positive ground around 151.50 following Japanese CPI data
The USD/JPY pair holds positive ground for the second consecutive day near 151.45 on Friday during the early Asian trading hours. The cautious approach from the Bank of Japan to keep monetary conditions accommodative exerts some selling pressure on the Japanese Yen.
AUD/USD depreciates on risk aversion amid a stronger US Dollar
AUD/USD extends its losses for the second successive session on Friday. However, market activity is expected to be subdued due to light trading on Good Friday. Meanwhile, the US Dollar strengthens as recent data indicates annualized economic expansion in the United States, driven by consumer spending.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Top 3 Price Prediction BTC, ETH, XRP: Retail watches from the sidelines with a bias for shorts
Bitcoin is showing strength as markets head into the Easter holidays. As it rises, altcoins are following suit, with Ethereum and Ripple posting almost similar gains. Meanwhile, there remains an unfilled CME Gap, with a lot of liquidity also resting above and below BTC price.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.