Daily Commentary BY THE CURVE TEAM –

Trump Pulls Tariff Trigger

18th of September, 2018

Markets spent the night on edge as Trump indicated he would announce his latest move on tariffs after the market closed and he didn’t disappoint.

After the markets closed, the Trump administration announced another round of tariffs on Chinese imports covering around $200bln worth of trade. The tariffs will start at 10% and will be ratcheted up to 25%, giving US firms time to adjust and source alternate supply chains where available.

But there was a kicker. Trump has said that if China retaliates, he will pull the trigger on a further $267bln of Chinese imports.

The US administration is not happy with the pace of negotiations and want results. Markets have reacted with caution after the announcement but we aren’t likely to know the full extent of the fallout until China responds.

In a statement Trump said that:

“We have been very clear about the type of changes that need to be made and we have given China every opportunity to treat us more fairly. But so far, China has been unwilling to changes its practices.”

The phased introduction and clear path for further escalation if China responds suggests two things. It suggests the US administration wants results but doesn’t expect to get them in a hurry.

What it does do is it creates uncertainty and markets, business and consumers don’t like uncertainty. Neither does the Fed. We will get the latest thoughts from the Fed when they meet next week. Until then, we await to see the fallout from the latest announcement.

David Flanagan

Director - Interest Rate Markets