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Trump’s trade war to spark a stream of negative events across the globe
Global markets were in chaos on Wednesday following the announcement by the Trump administration of a lengthy list of new products that tariffs on $200 billion worth of goods from China will be levied against.
As such, President Trump’s heightening of the trade war between the United States and China is about to trigger a chain reaction of negative events across the world.
As I was quoted as saying in The Guardian, CBS News and IFA Magazine, amongst others, the escalation of these trade tensions will lead to higher inflation, meaning interest rates will rise, as will the dollar.
Up to now, low-cost products from China have helped to sustain prices, and keep U.S. and global inflation low.
However, this latest action by the U.S. administration will make goods costlier therefore placing upward pressure on inflation.
It’s more probable that in order to offset rising inflation, the Federal Reserve will hike interest rates, which will in turn strengthen the dollar.
A strong dollar could result in companies letting workers go due to less consumer consumption it could prompt. In addition, people may have more incentive to purchase goods from overseas and more disincentives to export.
Stress is also amplified in emerging markets with a stronger dollar, some of which are already faced with heavy pressure.
Therefore, it would appear that President Trump’s trade spat will end up being incredibly damaging to both the U.S. and global economy.
As such, it’s imperative that investors remain vigilant and ensure their portfolios are sufficiently diversified to sidestep risks and make the most of potential opportunities brought about by market volatility.