

Market Brief: Tariffs up the ante
02 Jul 2020
As markets continue to react negatively to the current rising tensions around trade tariffs, US businesses have appealed to the White House to provide clarity.
Today's data releases |
Key levels | |||
---|---|---|---|---|
Support | Resistance | |||
13.30 | Chicago Fed index | GBP/USD | 1.3890 | 1.4219 |
GBP/EUR | 1.1134 | 1.1560 |
Market overview
As markets continue to react negatively to the current rising tensions around trade tariffs, US businesses have appealed to the White House to provide clarity over its tariffs on steel and aluminium after some of the biggest exporters of steel to the US were made exempt. Friday’s rollback saw the EU members as well as Canada, Brazil, Mexico and South Korea all exempt from the new tariffs until May 1. Still, China remains subject to the tariffs and has hit back with a proposed $3bn of US imports, including US steel pipes, fresh fruit and wine, and pork. However, China has so far held back from imposing tariffs on US soybean exports, a measure that would significantly hurt both China and the US. Rather, the authorities appear to want to keep such a measure in reserve as their ace in the hole if a trade war were to erupt.
On Saturday, the China Daily reported that China is researching what additional US imports it could impose tariffs on, citing former vice commerce minister Wei Jianguo. While on Sunday Treasury Secretary Steve Mnuchin said he was optimistic the US could reach an agreement with China to avert the planned tariffs on $50bn of imports, with President Trump having asked China to reduce its trade surplus with the US by $100bn. Broadly, these developments may suggest that the two countries are not actively seeking to start a trade war with one another but are rather are open to other avenues to addressing the trade imbalances between them.
Third estimates of UK Q4 GDP will be published on Thursday. This will include a cluster of other data including the current account (also for Q4) and the Bank of England’s figures on lending. Newsflow on Brexit will continue through most of the week as Westminster, Dublin and Brussels are expected to begin talks on how feasibly to maintain an open border between Northern Ireland and the Republic in post-Brexit conditions.
On Saturday, the China Daily reported that China is researching what additional US imports it could impose tariffs on, citing former vice commerce minister Wei Jianguo. While on Sunday Treasury Secretary Steve Mnuchin said he was optimistic the US could reach an agreement with China to avert the planned tariffs on $50bn of imports, with President Trump having asked China to reduce its trade surplus with the US by $100bn. Broadly, these developments may suggest that the two countries are not actively seeking to start a trade war with one another but are rather are open to other avenues to addressing the trade imbalances between them.
The day ahead
This week is cut short by the Easter break and is likely to be dominated by headlines on trade tariffs. Major US indicators will be in relatively short supply. Second revisions to Q4 GDP are due on Wednesday, though most observers are already pondering the extent of any slowdown over Q1. The headline and core PCE price index numbers for February will appear the following day.Third estimates of UK Q4 GDP will be published on Thursday. This will include a cluster of other data including the current account (also for Q4) and the Bank of England’s figures on lending. Newsflow on Brexit will continue through most of the week as Westminster, Dublin and Brussels are expected to begin talks on how feasibly to maintain an open border between Northern Ireland and the Republic in post-Brexit conditions.