EU and China with commercial weapons ready, but without firing. Markets should focus on fundamentals

EU and China with commercial weapons ready, but without firing.  Markets should focus on fundamentals

Much has been heard in recent weeks about an increase in trade tensions between the United States and China: both countries have threatened the imposition of tariffs; however, they are just that, threats.
On the one hand, the president of the United States, Donald Trump, maintains the commercial rhetoric with which he won the elections: he accuses several countries of the wide trade deficit registered by his country.
China, South Korea, Mexico, Germany, among others: they are in the spotlight of Trump, because he points them out as The culprits of generating trade deficits, in addition, according to him, have generated the loss of jobs to US citizens.
Trump’s stance on the trade deficit has led him to revise the terms of trade, such as the negotiation of the North American Free Trade Agreement (NAFTA), the search for better agreements with South Korea, and, above all, the threats to impose tariffs on imports of aluminum and steel, as well as some of the imports from China.
On the other hand, China has been one of the few that has faced the US position; in fact, he is one of the few who have the capacity to do so, for which he has announced reciprocal measures to those taken by Trump.
Next, the nervousness in the financial markets increases due to a protectionist position on the part of the two largest economies in the world, which could generate a loss of the dynamism of global trade and put the economic recovery at risk.
We must put things in their place: for now the two countries have taught their weapons, but the instruction to activate them has not yet been given.
However, although the United States and China announced the size of the tariffs and the list of products to which these measures would be imposed, they have not yet entered into force, and both nations have said they are willing to begin negotiations to avoid implementing such measures. measurements.
Both countries know that imposing tariffs could affect their own economy. To begin with, on the US side, the most affected sector would be agriculture, given that it depends on soybean exports to China. Even for political reasons, the midterm elections in the United States would not be beneficial for Trump, since it would affect the agricultural states that supported him in the elections.
For China, limiting its access to US markets would mean delaying its “China 2025” plans, with which they aim to be an industrial center that can compete with the world’s leading economies.
Everything points to the fact that, despite the harsh comments that may be given, both parties will be interested in maintaining commercial relations.
The Trump administration has already shown its ways to negotiate: it starts with strong signals (ending NAFTA once, imposing tariffs on all countries) and gradually giving in to some of its requests to reach new agreements, as it seems that will reach an agreement with Canada and Mexico, and has exempted countries from steel tariffs.
In other words, until we do not see a real implementation of protectionist measures, we must point out that the scenario of a solid world economic growth is still valid.
In fact, the World Trade Organization (WTO) already forecast a volume growth of 4.4% for this year, well above the post-crisis average of 3.0%, a sign that economic activity worldwide keeps healthy and with a view to maintaining a solid dynamism.
With this in mind, we point out that markets should focus their vision on the economic fundamentals, with a US economy that will grow at levels close to 3.0% this year and a global economic strength, in other words, it is correct to say that the Global growth is still under way.
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