Roberts Nash Advisory Group

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Trade War?

Financial markets are reacting negatively to a potential trade war between the U.S. and China. War, however, may be too strong a word at this juncture. We say this because of the uncanny strategy used by the combatants:

1) Trump just announced that he intends to pick a "measured fight" with Xi (tariffs on $60 billion out of $525 billion of total U.S. imports from China);

2) In 15 days, Trump is going to tell Xi exactly where he intends to "hit" him (the list of products that would be subjected to tariffs has yet to be established);

3) But before he takes the initial swing, Trump will hold a 30-day consultation period to discuss whether or not this is a good idea.

Xi, for his part, says that if punched, he would retaliate by:

1) Hitting Trump at 3% of his capacity (tariffs on $3 billion on $186 billion of total imports from the U.S.).

2) Xi also promises not to hit Trump in the "soybeans" ($14 billion of U.S. exports to China), at least for now.

We do not wish to be complacent as we recognize that protectionism is a growing risk for the global economy. However, we still think that our two pugilists are very much aware that their respective economies would both suffer if current trade tensions were to escalate to a point of no return. Though yesterday’s nomination of John Bolton to replace Mc Master as national security adviser certainly raises the odds that punches might be exchanged between Trump and Xi, we still think that the 30-day consultation period limits the potential of a fatal blow to the global economic expansion.  Full Report


** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **

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