US: Trade wars, Fed hikes & late-cycle economy toxic for risk - ING

Viraj Patel, Research Analyst at ING, suggests that global markets will be faced with a event risks this week – with the US administration’s mercantilist policy rampage at the top of the list of things for investors to keep a watchful eye on.

Key Quotes

“One could argue that President Trump is playing a dangerous trade game after upping the ante on Chinese tariffs to $100bn last week – and broadly taking the view that such a large threat will force Beijing to ultimately cave in. In a week where President Xi will make a highly anticipated speech (Tue), the US Treasury may also release their semi-annual FX report (usually mid-month) – which will examine which of the US’s major trading partners may have manipulated their domestic FX markets in an attempt to gain an unfair trade advantage.”

“While we continue to believe that markets will be the voice of reason in any looming trade war, what’s more unnerving is that Trump’s protectionist push is coming at a time when (i) Fed policy is now ‘tight’; (ii) the US is showing classic late-cycle economy signs and (iii) the US fiscal deficit is set to balloon.”