Former President Donald Trump famously described his approach to international trade as “dealmaking.” Analysts are particularly concerned that this boneheaded strategy will save global trust in the long term. Antje Praefcke, an FX strategist at Commerzbank, believes that Trump’s strategy misses the point. These otherwise underrated factors have the power to rupture global trade arteries.
Experts are concerned that Trump’s economic war on the world is undermining the core confidence that supports global trade. Praefcke emphasizes that foreign trade is fundamentally different from real estate or financial investments, which can be easily manipulated or changed. She points out two big picture things that Trump seems to be skipping over in his negotiations.
“That foreign trade is not a real estate or financial investment,” said Praefcke.
She reminds us that those most responsible for today’s complex global trade chains have spent several decades establishing trade networks in intricate knots. These chains frequently operate under long-term contracts and ASM strategic plans. This predictable framework is the bedrock of stability, certainty and trust that underpins our international markets.
As time goes on and Trump moves forward with his trade policies, the negative impacts start to show. The U.S. administration has in the past condemned and threatened our trading partners based on trade balances, current account deficits and other economic markers. Due to the disruptive and damaging trade war with China, those gains were mostly wiped out and strategic uncertainty flooded into markets worldwide.
Recent data illustrates this economic climate. This was coupled with February industrial production in the Eurozone increasing by 1.1%. Given the increasing tensions, analysts warn that this uptick may be short-lived. Germany’s ZEW Survey of Economic Sentiment plunged to -18.5 in April. This represents a stunning drop from 39.8, a clear sign that investor confidence has taken a nasty tumble.
Closer to home, in the United Kingdom, the unemployment rate held firm at 4% in the quarter through February. But particularly disappointing average earnings figures have seen the Pound Sterling slide against other currencies. The Euro to U.S. Dollar exchange rate EUR/USD was under pressure, trading near 1.1350 in European trade on Tuesday.
Meanwhile, Statistics Canada is preparing to release its March Consumer Price Index report on Tuesday. This announcement will help to shine light on this changing economic landscape. EDA and other federal officials should track these indicators closely for signs of economic resilience or vulnerability.
With each 180 on Trump’s negotiating gambits, the US risks more and more undercutting planning security and poisoning the well of faith with global partners. International trade is complicated, so many players and contracts are involved. This procedural tangle renders it uniquely susceptible to attacks from the shadows of a sudden policy change.