The Macro Report | April 2018

Trump’s trade bluff?


President Trump in March proposed tariffs on an estimated $50 billion in imports from China, weeks after slapping tariffs on aluminum and steel. In April, China retaliated by imposing tariffs on U.S. imports. While there is low probability the tariff dispute between the United States and China will erupt into a full-scale trade war, the markets are struggling to grasp the implications of the measures. We think the world’s two largest economies will resolve differences through negotiations, but the process could drag on.

The Federal Reserve Bank of New York named John Williams, who has helmed the San Francisco Fed since 2011, as its next president. Assuming one of the top leadership positions at the U.S. central bank, Williams brings expertise and perhaps a dovish disposition. Meanwhile, in Germany, a coalition agreement between the Social Democrats and Angela Merkel’s Christian Democrats could lead to an uncustomary relaxation of fiscal policy. In Asia, Japan’s economy continues to struggle with slow growth and inflation remains below the central bank’s target.


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While there is low probability the tariff dispute between the United States and China will erupt into a full-scale trade war, the markets are struggling to grasp the implications of the measures.