The Daily Update - Trump, Trade, Trouble

President Trump has already warned that further tariffs would follow if he does not get the concessions he feels are required from China. The timing of his latest threats are a little surprising given the intended meeting of the two leaders at the G20 meeting in Buenos Aires in November and the further $200 billion of import tariffs due to move from 10% to 25% on January 1st.

It is reported that the US is preparing a further $257 billion of trade tariffs should the talks fail to reach an agreement and that these further penalties could coincide with the Chinese Lunar New Year holidays in early February. Trump in an interview yesterday said ‘I think we will make a great deal with China, and it has to be great because they’ve drained our country’. At an event in Indiana at the weekend talking about the ongoing trade war he added ‘but we are going to win’ ‘you know why? Cause we always win.’

It’s really difficult to see who can win from a drawn out trade war as it would appear to us that you can only have losers from the situation with economic activity likely to bear the brunt.

Regular readers will know about our investment process and our Net Foreign Asset scoring system which ranks countries according to their entire balance sheet. This includes the household and corporate situation and not just the government balance sheet, and expresses the score as a percentage of GDP. The US is a deteriorating country from this standpoint, so is the UK, both with the government balance sheet the primary concern. A continuation of trade frictions will certainly not help alleviate the pressure, with the US forecast as a two star country over the coming few years which would put them below our current minimum requirement of a three star rating.

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