Trade skirmish, or trade war?
- The trade skirmish so far does not amount to that much economically. The US administration's current trade taxes can be avoided for the most part. If the US consumer has to pay the tax, the tax is largely invisible. The goods that are being taxed can be substituted, redistributing global trade but limiting damage (beyond "frictional" costs).
- US President Trump's threat of another USD 200bn of goods to be taxed (at 10%) is an escalation. Markets still seem to regard this as spin rather than substance. A serious trade war risk would produce a bigger reaction (non-Chinese companies are just as damaged by taxes on goods partially made in China. Most trade is run by large listed companies).
- The EU publishes its current account data today. Probably not the best day to be publishing current account data.
- ECB President Draghi is scheduled to speak at the ECB's conference for central bankers. The conference is more about long-term trends, but Draghi is not a person to pass up an opportunity to be dovish. Lane and Praet of the ECB, and Bullard of the Fed are also on the agenda.