20.09 - China and EU are to form a strong alliance
It seems that with all the chaotic situation surrounding world markets there still might be a way to benefit from the situation.
This week has brought us something we truly hoped we wouldn’t get – first wave of $200 billion worth of tariffs. And the situation became even more shaky than it was a week ago. With Chinese planning on responding to the damages and planning to hit ones of the US most thriving branches of production there is no way the situation is going to be the same ever again. But for us there might be ways to benefit from the whole trade war situation.
With uncertainties encircling Asia and America there is a still a pretty strong economic region that has all the chances in the world to bloom in the situation – Europe. Although when Americans were just getting started with the tariffs Europe was one of the targets. Right now thanks to Merkel’s negotiating skills the situation is no longer turned against Europe. Moreover, being so different from Asia and America and being in different trading relationship with both sides of the conflict the region becomes more and more attractive for traders, investors and new trading partners who started to turn away from the United States.
Look at this week alone. With Asian stocks being really low after the tariffs’ announcement on Tuesday. European numbers went right up. All because for the day of certain turbulence traders wanted to be in the safe haven. But what if the situation become permanent and Europe gains the name of the safest, most stable economic region in the world. Harboring two of the world’s strongest economies – Germany and France, it has all the chances to become just that.
Of course there is always risk appetite that awakens inside traders but for that kind of trading one can always turn to Asia for several days, see the kind of the risks trading there bears and then return to Europe for stability. Although a lot of that stability is there only until March, when Brexit takes place. But until that time we are going to see a lot of traders come to the region seeking something new.
With Europe on the rise it is fully possible that euro is going to replace dollar as an international currency in the nearest couple of years. Especially given that European parliament takes its course of actions on that path.
With United States pushing everyone away from themselves, we have to watch out for the new investment opportunities in China. But old and existing Chinese businesses bear a lot of hazards for us traders with their instability and inability to meet previously promised deadlines and output numbers. But there is always something to look out for in today’s trading world. And we are going to focus our eyes on European-Chinese friendship as it is bound to get even stronger.
Second largest economy on the world is about to back up euro – imagine the boost. Looking at the future of these relationship we can say that we are both intrigued and a little bit worried for the future of the United States. While all of the other economies unite and make new friends by softening international policies, Trump moves the States into a full isolation. Of course, there is too much connecting US with the rest of the world and in modern conditions full isolation is impossible, but it is possible that in case Trump is re-elected for presidential seat in 2020 the perspectives are not as sunny for the American economy.
But back to euro and yuan friendship. With yuan representing emerging currencies and euro aiming to push dollar off the first position, firmly occupied by the American currency it is likely that the two economies are going to untie against dollar. And boy, can it be painful for the greenback.
In case there is a real partnership between Europe and China boost and recovery will be seen by all of the emerging economies as yuan is going to bring a lot of traders’ trust to the segment of the market. There are also going to be certain advantages given to the newly found partners. For example, China is already talking about reducing import tariffs for existing and future partners of the Republic. That indicates that Chinese are not going to slow down with import rates which point positive outlook to their economy as a whole. So maybe not everything is lost on the Chinese.
The whole world is dealing with the fallout from businessman being in charge of the strongest economy in the world. His approach to politics and international relationships is exactly the same as they were while he ran Trump’s family nosiness. There were a few obvious principals that Trump is still employing today, but in politics.
First of all, Trump kills every try to name American economy and/or his policies weak. Even if he has to lie for it. That is one of the most damaging trait for us trades as we are being led into misbelief about the true state of the deal. Of course we see the real numbers, but we also hear a lot of false predictions that, according to Trump, are to come to life very soon. Most of them concern America being very friendly and strong in the nearest future which would lead to us investing in American economy that could be on the border of collapse for all we know.
The second is the way he deals with the competition. It is ruthless and at times quite paranoid. It also doesn’t always have necessary ground under it. Like trade war with China that the whole world is suffering from right now. All because Trump decided that China poses a fatal threat to the economy of the United States. And voila – 5 moths later we have $200 billion worth of tariffs imposed on a former partner of the Unites States. And we don’t have to tell you what that does to trading in the world.
Third – Trump doesn’t really back down from his decisions. Only in case they were clearly imposed on him by the Senate or world’s society. His trade deal with China is the best proof for this. When it came to imposing tariffs nothing could influence him, but negotiating trade peace with him proved to be nearly impossible for the Chinese as he backs out the minute the deal seems to be closed. That as well did a lot to undermine trading situation in the world.
All and all we can see that business approach to international policies is one of the worst things that can happen. Right now we have to live in the world where approach like that is a norm, but we can always hope that in 1.5 years it will all be over and things will finally go back to normal.
- by Anna K.