Bracing for more US tariffs in China - AmpGFX

According to Greg Gibbs, Analyst at Amplifying Global FX Capital, the other key risk for markets apart from the NFP, they are waiting for this week is whether the US administration will announce a go-ahead on tariffs of up to 25% on an additional $200bn in Chinese imports. 

Key Quotes

“The market may already have braced itself to some extent for this outcome.  However, it will represent a significant escalation of the US trade war on China and reinforce the troubled outlook for China as it grabbles with credit excesses, and growing unease over the state of global growth and emerging market assets.”

“Furthermore, the tariffs threaten to undermine confidence in the US, raise consumer prices and place additional pressure on Fed policy.  While the Fed might see tariffs on consumer goods as a temporary boost to inflation, they can have more sustained effects in an economy facing capacity constraints.”

“For instance, they may encourage workers to push for higher wages, and US companies may feel they have scope to pass on more of their rising costs to selling prices.”

“A decision to move ahead on these tariffs may be seen as a more permanent drag on global growth, and extend a destabilising rise in the USD, placing pressure on companies and governments in several emerging market economies with USD debt.”