What Next in the Trade War?

A sense of optimism has returned to global financial markets, as they take in the expectation of continued accommodation by central banks and the resumption of trade talks between China and the US. While President Trump’s capacity to surprise and his tendency to interject directly make the eventual outcome of the trade negotiations difficult to predict, there are four developments investors should be prepared to encounter.

James McCormack
Jul 10 · 4 min read

“Trade policy will be a bigger factor in 2020 elections than in any US elections in recent memory, meaning there will be plenty of noise around the issue along with the possibility of unexpected changes.”

The third likely development is more explicit US discussion around exchange rates. It is too early — and alarmist — to suggest the trade war will morph into a currency war, but President Trump has spoken out against a strong dollar, mostly while criticising the Federal Reserve. Such verbal interventions can be effective in the very short term. A longer-term and more explicit dollar policy has been absent for some time, with the Federal Reserve allowing markets to determine exchange rates, as do most central banks in advanced economies. US currency market intervention has happened only three times in the past 25 years.

Why? Forum

Commentary from Fitch on why we think what we think.

James McCormack

Written by

Global Head of Sovereigns at Fitch Ratings

Why? Forum

Commentary from Fitch on why we think what we think.