Trump’s trade tactics erode global trust – Commerzbank
Obviously, there is a learning curve for the US president when he continues to backpedal on tariffs. But the damage is done, trust is destroyed. Trump may call all these actions “dealmaking”, but in my view he underestimates two things, Commerzbank's FX analyst Antje Praefcke notes.
Uncertainty keeps USD under pressure
"Firstly, that foreign trade is not a real estate or financial investment. Although international trade, as the name suggests, is also a 'deal', it is not a deal that involves the purchase or sale of an item between just two parties or contractual partners. Yes, two countries are apparently trading with each other in the sense of the macroeconomic view. But in fact, countless companies and service providers are involved here, with a variety of intermediate and end products. They are the ones who are trading with each other, even if their 'dealing' is ultimately reflected in the countries' trade and current account balances - the economic indicators that the US administration looks at."
"The second aspect is that these actors have spent decades building supply and trade chains and often have long-term contracts or plans. This cannot be changed, redirected or stopped from one moment to the next. A production facility cannot simply be sold, planned or built like a piece of real estate or a financial investment when the framework conditions change drastically."
With every U-turn in his 'dealmaking', the US president destroys further planning security and even more trust. Which is why I ultimately do not expect any significant recovery in the US dollar as long as this uncertainty persists for all participants in world and economic affairs.
Author
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.
