Trade war – how Wall Street escaped disaster

The stock markets were so close to the abyss.

Although it has already been briefly discussed once, it is still worth taking another look at the events of a week ago when it comes to trade war: When China announced counter tariffs and brought Donald Trump to the boil. The events are an indication of how impulsively the US President is reacting and why we cannot assume that the US administration has an orderly strategy.

The struggle for the trade balance deficit and the trade war

Since the 1980s, the former real estate mogul Donald Trump has been raving in interviews with Larry King about the “Billions of Dollars” that Americans are losing in trade – at that time it was about Japan. This has always been his economic worldview, “the USA would be taken for a ride” and that has not changed until today.

What’s more, now that the main issue is to prevent China’s rise to the number one economic power through the trade war, the conflict has taken on a completely different dimension. A tripling of China’s gross domestic product to over 13 trillion Dollars within a decade is a concern not only for the United States. For one and a half years, Donald Trump has been trying to put China in its place with punitive tariffs, for many reasons. But what a ludicrous, uncoordinated strategy he is applying is shown by the events that took place in connection with the tariff increases at the beginning of September.

Trumps rage outburst

Just under a week ago, the president was pulling off the beaten track on Twitter. He apparently stopped his frustration that he had been persuaded not to hit back harder when it came to Chinese tariffs. Lucky for the bulls and vice versa bad luck for the bearish investors. According to statements by three people present, the US channel CNBC reported that Donald Trump was furious about the 75 billion Dollar Chinese counter-tariffs on US farmers, which are based on the principle of pinpricks.

The president spontaneously intended to escalate the trade war and allegedly double tariffs. It was apparently very difficult to dissuade Trump from his plan. Finance Minister Steven Mnuchin and Trade Representative Robert Lightyzer could only dissuade him with the help of various CEOs who pointed out the consequences for the markets. The president confined himself to increasing tariffs by five percent from September 1st, but to make himself even more angry in the next few days that he let himself be persuaded. Donald Trump, the ticking time bomb?

Wall Street, for example, had slipped past a really juicy price slump that day.

Conclusion

These events show the explosive nature of the US President’s behaviour and the lack of long-term strategic planning behind it.

This is why the President’s ludicrous “Twitter behaviour” is currently being investigated so thoroughly, as there are some conclusions about his eruptive way of thinking and the subsequent market reactions. 14,000 tweets for three and a half years, up to over 80 a day – and this is the head of government of the world’s largest economic nation.

We might actually think that he has no time at all to read his way into a complicated subject, to get informed and to develop a strategy (e.g. in a trade dispute) with different scenarios.

Ergo: Apparently Wall Street and its score is currently the only regulator for the US President with regard to the elections in 2020, which keeps him away from economic policy amok actions in the trade war.

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