Trumps trade strategy – Commerzbank
The markets are increasingly optimistic about the prospect of a permanent reduction in US tariffs after the end of the 90-day moratorium, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.
US policy is a significant burden on the USD
"One reason for this is likely to be the Canadian government's recent U-turn, which allows negotiations to continue. What happened: US President Trump had announced an end to talks with Canada's trade delegation because Prime Minister Carney's government had insisted on a digital tax that would have primarily affected US tech companies. This tax, which would have come into force today, has now been withdrawn."
"Now, one might think that Trump's strategy has obviously been successful. Sure, if you assume that he would have actually significantly increased tariffs on Canada, one of the US's most important trading partners. Not only does the US import essential goods from its neighbour, including a variety of important raw materials, from crude oil to vital base metals, but it is also an important market for US products."
"The Canadian government would therefore be in a position to cause considerable damage to the US economy – tit for tat, so to speak. So if Trump's strategy is to shoot his own economy in the foot if necessary, I would be cautious about praising it. After all, the risk of a ‘political accident’ poses considerable dangers for the US economy. This is a key reason why we view the US policy as a significant burden on the dollar."
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FXStreet Insights Team
FXStreet
The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.
