Jury out on trade war risks, what is the latest? - Westpac

Analysts at Westpac explained that there was plenty of news on the Australian economy last week but the main market focus was once again on US-China trade tensions.

Key Quotes:

"China announced tariffs on US imports in retaliation for the US tariffs and then President Trump declared China’s response to be unfair and threatened tariffs on another $100bn of Chinese imports.

There was however an attempt by new White House economic adviser Larry Kudlow to calm markets. Kudlow even declared Trump to be “ultimately a free trader.” This helped US equity markets stabilize mid-week, before sliding once more into the weekend.

The steps announced so far should not cause great damage to China’s export machine, while no one is likely to slash their US GDP forecasts in response to China’s new tariffs. But if there’s little impact on yawning US trade deficits, will President Trump simply move on? US presidents have plenty of scope to impose trade penalties without having to negotiate with Congress. Arguably, Trump is being true to his 2016 campaign platform and could double down on this into the November mid-term elections.

Markets may struggle for direction as the jury remains well and truly out on how worried we should be about trade policy."