His anti-trade opposition has recently been bolstered by none other than US President Donald Trump. He announced that he is considering new tariffs on American trading partners – as high as 15% to 50%. This news comes at a time when markets are abuzz with hope. Thrilling trade headlines and a major consensus agreement between the United States and Japan have stoked this positive ambience. The US Dollar took a break from its downward spiral. It bounced back after tumbling to a two-week low during the course of this week.
If you Trump’s comments, a real strategy emerges. Some contemporary economists argue that he would only promise tariff reductions to countries that agreed to reciprocate by lowering their own market barriers to U.S. products and services. He touted the recently-passed trade deals as “fair and historic” and emphasized his administration’s resolve to change the course of trade. The president had previously threatened to levy tariffs of up to 30% on select European imports. This duplicitous move indicates a larger policy direction for all of our international trade relations.
The US Dollar Index (DXY) on Thursday was trading just above the 97.38 level, an early indication of a turnaround. This was a particularly strong upward movement for the dollar, which had come under significant downward pressure, most notably, after hitting its two-week low on Wednesday. US stock futures flipped to the positive side, supported by the upbeat mood over US-China trade progress.
The new economic data released on Thursday added a lot to that narrative. The preliminary PMI for the US and Initial Jobless Claims data were released. These numbers act as important barometers of our national economy’s success. Meanwhile, the yield on the benchmark 10-year US Treasury held steady at about 4.39%. This lack of movement is indicative that investors are clearly risk averse in the current climate.
Trump’s upcoming visit to the Federal Reserve’s headquarters in Washington at 20:00 GMT is expected to intensify political pressure on Fed Chair Jerome Powell. Many market observers expect the result of this meeting to be conversation about easing back on the buttery monetary policy considering the ongoing volatility of trade conflict.
Japan’s manufacturing sector has contracted, with a PMI of 48.8. This decrease compounds concerns about the strength of fiscal performance in major areas of the globe. The European Central Bank has remarked on the current economic landscape, stating it “remains exceptionally uncertain, especially because of trade disputes.” Comments like these highlight how closely the global markets are interrelated and how shared blame can lead to damaging repercussions of US trade policy.