by John Stepek of Money Week

If you hadn’t realised by now, Donald Trump is serious

The copper price is sliding.

Chinese stocks are sliding.

Oil tanked by 7% at one point yesterday.

It does all rather suggest that maybe investors are really starting to worry about the burgeoning global trade war, and its impact on global growth.

And they’d be right to.

First things first. If you didn’t realise it already, then you need to get this into your head: Donald Trump is serious. He has believed for a long time in an “America First” world where the US stops playing the role of global policeman and instead looks out for itself.

As far as he’s concerned, other countries have been freeloading off the US and taking advantage of its good nature and overweening sense of responsibility for way too long.

Whether you agree with this or think it is deluded, is irrelevant. He’s the president. That’s how he thinks. That’s what his policies are aiming at.

He has also surrounded himself with advisers who agree with him. “Yes” men, you might say. That’s exactly what you’d have expected given his corporate history.

So talk of trade war is not a craft feint, or a bluff, or a tactic in some 3D chess game Trump is playing. It’s just what he wants.

Secondly, other countries are not keen to roll over and play nice or make concessions. National pride is one reason. Another is that they can’t quite believe that the established world order is being overturned. There’s a sense that “you can’t do that”.

He can. He is.

Given all that, then as Paul Ashworth of Capital Economics puts it, “it’s hard to see how a full-blown trade war can be avoided at this stage”. And that’s the reality that we, as investors, have to deal with.

So what does that mean?

A full-blown trade war would be an expensive business for everyone

So far, a 25% tariff has already been imposed on $34bn worth of Chinese imports. That will be increased to $50bn soon. And earlier this week, a list of another $200bn-worth of goods was published, with plans for a 10% tariff on those within the next few months. That’s pretty much half of what the US imports from China.

That’s just the start. Trump is also talking about imposing tariffs on imports of cars. This “would represent a significant escalation”, notes Ashworth. There are quite a few different options. The most damaging would be to impose tariffs on both finished vehicles and parts.

“A blanket 25% tariff on parts would devastate tightly integrated supply chains in North America, causing significant harm to the economies of Canada, Mexico and probably the US too.”

Eventually, says Ashworth, the US might even withdraw from the World Trade Organisation (WTO). If that happens, then arguably, it would be curtains for that particular institution, because there’s not much point in a world trade group that doesn’t include the biggest economy in the world.

And of course, this is all before you consider the impact of retaliation.

According to Andrew Hunter, also at Capital Economics, a “full-blown global trade war could eventually reduce world GDP by 2-3%, driven mainly by a loss of efficiency from the unwinding of global supply chains”.

The US would be more insulated from the impact than some countries, as exports account for a small percentage of GDP. But US multinationals – which make up a huge chunk of the S&P 500 – would take a “more severe” hit.

Note that not all of the current market worry is about trade wars. China appears to be serious about forcing its economy to deleverage. Every other day we’re hearing about another bond default. This is a good thing – it’s easy to forget these days that markets and capitalism have to allow failure in order to work – but it’s not an easy process, particularly when it has been put off for a long time.

However, there’s no doubt that the trade war is now the big threat to the global economy and to markets. This is threatening to get much messier.

News and Commentary

Gold prices subdued as dollar extends rally (Reuters.com)

Gold notches a gain after back-to-back session declines (MarketWatch.com)

U.S. inflation steadily firming; labor market strong (Reuters.com)

U.S. Budget Deficit Jumps in First Nine Months of Fiscal Year (Bloomberg.com)

U.S. budget deficit totals $74.9 billion in June (PBS.org)

Ex-Barclays Euribor trader Moryoussef convicted in absentia in Britain (Reuters.com)

Andrew Hunter

Silver Krugerrand 2018 (First Ever) – Call And Pre-Order Yours Today

Silver Krugerrands will be available for delivery and storage on August 1, 2018

Global Trade War Is Escalating Fast (MoneyWeek.com)

China Plays for Time in Trade War With Subtle Shift in Rhetoric (Bloomberg.com)

China Has Been Preparing For A Trade War For Over A Decade (ZeroHedge.com)

Largest-Ever Sugar-Surplus In Recorded History” (ZeroHedge.com)

Another Billionaire Warns “We’re Running Out Of Gold” (SovereignMan.com)

Humane Immigration Will Make America Great Again. (GoldSeek.com)

Listen on SoundCloud , Blubrry & iTunesWatch on YouTube below

China

Gold Prices (LBMA AM)

12 Jul: USD 1,244.85, GBP 942.10 & EUR 1,065.97 per ounce

11 Jul: USD 1,250.00, GBP 943.63 & EUR 1,068.38 per ounce

10 Jul: USD 1,253.70, GBP 946.17 & EUR 1,069.41 per ounce

09 Jul: USD 1,262.60, GBP 946.95 & EUR 1,072.70 per ounce

06 Jul: USD 1,254.20, GBP 947.55 & EUR 1,071.09 per ounce

05 Jul: USD 1,252.50, GBP 946.89 & EUR 1,071.64 per ounce

04 Jul: USD 1,256.90, GBP 951.47 & EUR 1,079.80 per ounce

Silver Prices (LBMA)

12 Jul: USD 15.84, GBP 12.00 & EUR 13.58 per ounce

11 Jul: USD 15.92, GBP 12.02 & EUR 13.59 per ounce

10 Jul: USD 15.93, GBP 12.04 & EUR 13.61 per ounce

09 Jul: USD 16.21, GBP 12.15 & EUR 13.76 per ounce

06 Jul: USD 16.00, GBP 12.09 & EUR 13.66 per ounce

05 Jul: USD 15.95, GBP 12.04 & EUR 13.65 per ounce

04 Jul: USD 16.05, GBP 12.15 & EUR 13.78 per ounce

Recent Market Updates

– Ponzi Economy Will Lead To Next Global Financial Crisis

– World Cup Is 200 Ounces Of Gold Worth £140,000 – 30% Less Than Harry Kane’s Weekly Wage

– Chaotic BREXIT More Likely: Risk To London, While Frankfurt, Luxembourg, Paris and Dublin Benefit

– VIDEO: Italy €2.4 Trillion Debt To Create Eurozone Contagion and Global Debt Crisis?

– U.S. China Trade War Escalates as Russia and China Accumulate Gold

– Irish Gold Money Rings Found – Mystery Surrounds What May Be Ancient, Pre-Historic Currency

– Gold $10,000 In Currency Reset? Russia, China Gold Demand To Overwhelm Gold Futures Manipulation (GOLDCORE VIDEO)

– Italian Debt – A Financial Disaster Waiting To Happen

– As The Currency Reset Begins – Get Gold As It Is “Where The Whole World Is Heading”

– Buy Gold Or Bitcoin As The “Liquidity Party” Is Ending?

– Why Russia and Turkey Diversifying Into Gold May Signal A Bigger Global Shift

– London House Prices Fall 1.9% In Quarter – Bubble Bursting?

– Gold Exports To London From U.S. Surge 152% In 2018

– Manipulation of Gold & Silver by Bullion Banks Is “Undeniable”

– “Perfect Environment For Gold” As Fed Will Weaken Dollar and Create Inflation – Rickards

– Russia Buys 600,000 oz Of Gold In May After Dumping Half Of US Treasuries In April

global policeman

The post Trump Is Serious About A Global Trade War appeared first on GoldCore Gold Bullion Dealer.

S&P 500