Do you know where you are going to WITH THE TRADE WAR


Do you know where you are going to


(Parijat Tripathi)

Human life also says what suggest our markets – wars are good for absolutely nothing !! Being big-mouth is okay but still, it puts human life in the market also at peril. Life is sometimes guided and goaded by reels. Reel life has its impact on real life if talk about the trade war with GODZILLA. Japnese flick Godzilla (1954) displays the tale of the testing of American nuclear weapons which create a giant dinosaur. And the big brute threatens to destroy not just Japan, but the rest of the world. Same is happening now out of the theatre where Asians are at the risk of facing another American creation.

America has already has withdrawn from the TPP (the Trans-Pacific Partnership) as well as the Paris climate change agreement. President Trump now also seem to prepare to roll back the international trade arrangements which are there since 1945. American announcement of tariffs on $60bn of Chinese trade threatens to launch a trade war between the world’s two largest economies. It has made China appear to be in a retaliatory mode with its already suggested giant measures. Thanks to the kindness of the Almighty on Asian markets which have been taking hits whereas other markets are falling prey to the not-too possible horror. Talk about Japan’s Nikkei or China’s Shanghai Shenzhen or Hong Kong’s Hang Seng, even European markets are opening slightly lower.

This may look like an urban Godzilla roaming in the markets being a big-mouth. And we all know that in the end things will be fine. There won’t be any peril and there won’t be any Godzilla. It sure is going on as a silly game from the US front. President Trump’s bravados are observed well. The recent announcement of tariffs on steel and aluminum imports has been followed by a wide list of exemptions which also includes the European Union.  Trump’s plan is too childish with first threaten and then withdraw the threats after a little considerate concession from the other side. It may fetch some wows in political galleries of America but outside it is not worth a dollar..but certainly it may also cause an economic damage if not today then tomorrow.

China watches very calmly when Elsa Lignos of the Royal Bank of Canada says that “China will opt to under- rather than over-react.” Many experts opine it will be more than the minutest damage to the Chinese economy from the tariffs being only 0.1% of GDP.

The world is also watching the game of impatience and the moves of maturity from both sides. The appointment of John Bolton as his third national security adviser in 14 months by Trump has its own meaning. The well-known bully, Mr. Bolton is the same person who had argued the case for a first strike on North Korea less than four weeks ago. Though Canada finds the appointment as “a more rational concern” than a trade war, others on the other side of the Pacific do not think so. ‘‘The Tariff thing and the Bolton coming may together raise short-term market risks,” holds Ms. Lignos.

Be it really a Godzilla or just two hours in the theatre, it sure makes the investors think twice before making any move in the market life. The market has seen Merrill Lynch Wealth Management picking a trade war as the main market risk a couple of months ago. It also tops the polls at 30% in the latest survey. Therefore the future predictions are not too invisible going in this scenario – the situation may turn a negative color from here onwards.

Though the gap between the Libor rate and the swap rate is widening inch by inch and also the implications of a flattening yield curve which is considered to be a sign of recession, are not being accepted by investors, it seems to have very fewer chances for President Trump’s moves..even if they are deemed to be successful. The reason being this will encourage him to play more such tactics which may result in bigger storms. The movies have their sequels too.