Oil prices plunged on Friday after the U.S. and China both announced tariff hikes in tit-for-tat fashion. At the same time, markets opened on a positive note early Monday after President Trump struck a more conciliatory tone. But the respite could be brief.
Global financial markets are completely at the mercy of Trump’s twitter account these days. On Friday, stocks and commodities fell sharply after China announced an increase in tariffs on U.S. goods. In response, Trump announced yet another 5 percent increase in the suite of tariffs on Chinese goods, although, notably, he waited until after financial markets had closed for the week.
Over the weekend at the G-7 Conference in France, Trump sent mixed messages on the trade war, suggesting he had “second thoughts,” with his team subsequently clarifying that his second thoughts regarded his regret he hadn’t hiked tariffs by an even greater amount. Nevertheless, traders took comfort in his comments about wanting to make a deal with China, in addition to his assertion that China had called him up asking for a return to negotiations.
Stocks opened up on a positive note on that news. However, it should be noted that Chinese officials said that they were “not aware of” the phone call that Trump alluded to. When pressed by reporters about the nature of the phone call, Trump said: “I don’t want to talk about calls. We’ve had calls. We’ve had calls at the highest levels.”
If we’ve learned anything over the past few months, it is that these events turn on a dime. The incoherent strategy from the White House, and the complete lack of an official policymaking process, makes it impossible to predict how events will unfold. It is odd then that financial markets were so sanguine at the start of the week.
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