WHAT HAPPENED THIS WEEK?
📈The US trade deficit grew to $891 billion in 2018, a 10-year high, after adding over $100 billion since Trump took office. US Markets declined over 2% as investors digested this news amidst trade war concerns.
🗣President Trump publicly criticized Federal Reserve Chair Jerome Powell again this weekend, accusing Powell of “liking” raising rates. Markets are currently expecting no more rate hikes this year, particularly after Friday’s Jobs Report revealed that a paltry 20,000 new jobs were added in February.
🌏President Trump announced a 60-day timeline to end trade preferences for India and Turkey on Tuesday, specifically terminating duty-free entry of many of their products.
🇬🇧The European Central Bank held rates flat on Thursday to help stimulate Eurozone bank lending amidst Brexit tensions and a global slowdown.
💰Allegations of suspicious Russian money transfers expanded to Austrian and Dutch institutions this week. The transfers are estimated to be nearly $2 trillion dollars per year.
Nearing the Finish Line
The trade war drama continued for another week as reports surfaced that President Trump is pushing a quick trade agreement with China due to mounting pressure on stocks.
The US trade deficit continues to increase under Trump, mainly due to the ongoing trade war and the $1.5 trillion tax cut. Some analysts are worried that the damage will be permanent. Therefore, with each passing day without an agreement, the growing negative impact on our economy increases.
The former Chinese finance minister, Lou Jiwei, explained on Tuesday that China will not make large concessions to reach an agreement. He added that the US demands at this point are simply “nitpicking” while the framework of the deal is already in place. The two sides are reportedly focused on lifting the current tariffs and cutting import duties on US goods.
The impact of the trade war has extended to global growth as a whole. The OECD, Organization for Economic Co-operation and Development, cut forecasts citing global trade tensions. China specifically lowered its growth forecasts to 6-6.5%, the lowest in 30 years. However, global stocks have risen in the past several days following positive notes from the ongoing US-China negotiations. Analysts estimate that a formal agreement could raise global equities by nearly 10%. The world is watching as negotiations seem to be nearing the finish line.
Theresa May We Please Make a Deal
Negotiations in the Eurozone regarding Brexit’s exit deal are stalling, forcing many to worry about British Prime Minister Theresa May’s upcoming withdrawal vote in Parliament next week.
Reports surfaced out of the European Union that the UK is making unrealistic requests regarding their exit deal, and companies based in the country are already starting to respond to the pessimistic feelings. Toyota (TM) is reportedly lifting its manufacturing plant there while other carmakers might follow suit.
With mounting worries regarding a Brexit trade deal, the sterling continued to fall this week. The pound fell for a fifth straight day as a no-deal exit seems more likely by the day. All eyes will be on May’s vote next week regarding her latest Brexit plan. Bank of England Governor Mark Carney warned on Tuesday that the economic impact of leaving without a plan would be substantial.