After the Trump admin’s move to impose tariffs on up to $60 billion of Chinese imports led to vicious sell-off in global stock markets on fears of a full blown trade war, top market voices point out that the admin’s policies are less stringent than initially expected. Notably, following the announcement, the US stock markets tumbled, posting its biggest single day decline in a period of six weeks, shedding fell 724.42 points, or 2.93 percent, to 23,957.89, the S&P 500 lost 68.24 points, or 2.52 percent. Even as the global markets seem to fear a full blown trade war, even as China said that it would raise tariffs on U.S. imports of pork, fruit, wine, and other items in response to the Trump administration’s directive, which the president said on Thursday would be “the first of many”, we take a closer look at what could be the key implications going forward.
Minor economic consequences
While the global markets have certainly, entered into a panic mode, David Hensley of JP Morgan says that steps taken by Trump administration so far, still appear to imply relatively minor macroeconomic consequences absent a significant further escalation. In an interview to CNBC TV18, the expert pointed out that though the Trump administration’s stringent steps such as a levy of have unsettled the markets, the current step of levying tariffs on imports represents 10% of total imports will have minor consequence. On similar lines, Lewis Alexander of Nomura told CNBC TV18 that a levy of 25% tariff on 50 billion imports are below expectations.
Trump may become more aggressive
As pointed out by US President Donald Trump, that the current protectionist measures is just a the first of many, experts say that more stringent measures could be in store. David Hensley of JP Morgan says that a tariff revenue of a similar amount, $50 billion could be a major step, and dampen investor sentiment further.
China may compromise
According to Chris Wood of CLSA, China may settle for a compromise, rather than the issue snowballing into a full blown trade war. In an interview to CNBC TV18, the expert pointed out that Beijing is unlikely to play hard ball in terms of threatening to sell US Treasury bonds and the like.