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Long-term review

Trump is ready for a trade war with China.

On Thursday, the White House hosted a meeting on new duties on goods from China. Trump approved a list of Chinese goods worth $50 billion, upon which the US will impose duties of 25%.

China immediately announced that it would impose the same amount on duties on goods from the US - in particular, on goods such as soybeans and Boeing aircraft.

Trump previously stated that, in the case of retaliatory measures, China will impose duties on another $100 billion of goods from China.

Thus, Trump and the United States are taking another step towards a trade war.

My opinion: This is a rather stupid decision by Trump.

I will give one argument: Unemployment in the US fell to a multi-year low of 3.8% - and this is without any introduction of import duties from Europe, China, Canada or Mexico.

With today's realities, unemployment of 3.8% is practically full employment - it is impossible to achieve zero unemployment.

If the import of goods imposed by new duties from China will stop- who in the United States will produce these goods? And how much will be the increase in their prices? But inflation is the main risk for the growth of the US economy in the near future - and Trump's trade wars will definitely push inflation.

The second argument against trade wars: the US is one of the main beneficiaries of profits from the growth of world trade - if not the most important. Yes, the US has a large trade deficit - but these calculations do not take into account the profit from the spread of dollars around the world. The US dollar is the main export commodity of the United States, and trade wars, especially if the US is their main initiator is a strong blow to US prestige in the world - and the role of the dollar in world trade.

It would be possible to understand Trump's decisions on duties if the US economy was now in a deep crisis - and unemployment would have been at its maximum - but really this is not at all the case.

It is clear that Trump with his decisions is working out promises to his voters - those not very highly qualified workers in the US who lost their jobs transferred to China and other Asian countries. However, this is a bad example of how to run your programs.

Globalization carries many disadvantages, but there are many more advantages. The struggle against trade deficits is a necessary thing, negotiations and compromises are necessary.

Let's hope that Trump's unilateral, tough steps are only preparing positions before the talks.

If Trump's actions lead to a big trade war - his voters will greatly regret it.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Viele Grüße,
Analytiker: Sam Alan
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