US: Trade tensions? - Westpac

Sandeep Kanihama FXStreet Contributor

A new point of tension that has come to the fore this week is trade relations as overnight President Trump announced tariffs on steel (25%) and aluminium (10%) imports to the US in pursuit of greater production and employment in the US, according to Elliot Clarke, Research Analyst at Westpac.

Key Quotes

“Only time will tell whether this is a one-off or the first in a succession of protectionist measures. It will also be critical to assess how other countries respond, either through challenging the tariffs via the World Trade Organisation, or by responding with their own measures. Along with the fiscal uncertainty being created by the tax and spending initiatives (which could add near 15ppts to US government debt over the decade, if sustained), trade will be a key area of uncertainty for the US economy (particularly the US dollar) in 2018.”

“One of the countries that is likely most affected by these measures is China. Data to hand for 2018 suggests that, while authorities are having great success reducing speculation absent a substantial decline in residential construction activity, Chinese growth is still very susceptible to global growth trends. External demand provided a material windfall to China in 2017; but this will not be the case in 2018. Should additional protectionist measures be imposed by the US or others, the headwinds will grow stronger still.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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