May the Odds Be Ever in Your Favor... Or Maybe Just Neutral: Trade War Tango Continues

Trump's 'Hunger Games' Approach to Trade

Well folks it seems like we're back in the arena. Only this time instead of fighting for our lives against genetically modified mutts we're watching the U.S. and the EU engage in a trade war dance off. President Trump bless his heart has decided to delay those hefty 50% tariffs on EU goods until July 9th. Apparently he had a 'friendly' chat with EU Commission President Ursula von der Leyen probably over a plate of lamb stew (or whatever the Capitol eats these days). He initially wanted those tariffs in place by June 1st accusing the EU of being 'very difficult'—I know the feeling. Sometimes dealing with Peeta can be just as… challenging. Trade negotiations were ‘going nowhere’ according to a social media post by Trump. Seriously? Negotiating via Twitter? Even Haymitch Abernathy has better strategies when he's sober... mostly.

The EU's 'Girl on Fire' Response?

After the initial shock (much like when I volunteered as tribute) European stocks bounced back a bit. Von der Leyen probably channeling her inner 'Girl on Fire,' said the EU is 'ready to advance talks swiftly and decisively.' She even called their trade relationship 'the world's most consequential and close.' I bet Gale wishes he heard me say that about us. An EU official has said that European Trade Commissioner Maros Sefcovic will speak with his U.S. counterparts. Let’s hope they’re better at communicating than Peeta and I were in the arena. It should be enough to get an agreement like the one between the U.S. and the U.K. which is basically a matter of political will and depends on the U.S. side. If they do have the political will they should be able to have such an agreement but with a 10% tariff from the U.S. on all EU imports. Hardly any EU retaliation.

Berenberg's Chief Economist Warns: Brace Yourselves!

Holger Schmieding some fancy economist from Berenberg says those six weeks might not be enough to sort everything out. He thinks it's all about 'political will.' If things go south and we end up with 20% or 30% tariffs the EU will 'have no choice' but to retaliate. Schmieding calls Trump an 'interesting negotiator' who tries to shock people into concessions. Sounds like a certain President Snow I used to know except Snow had more poisonous roses and less Twitter. Remember If you hit hit back harder! But in this case the EU has to stay calm as their market is a big market and they matter economically to the US.

Massive Uncertainty is Bad For Business

Guntram Wolff from Bruegel points out the 'massive uncertainty' in all this. He says it's bad for business consumers and frankly 'an unnecessary step.' It's unclear what the U.S. President even wants! According to Wolff the EU is playing it 'rather well,' unlike the U.K. who 'gave in on all kinds of demands' and China who 'escalated to a point where the U.S. had to blink.' Europe is taking a middle path and keeping a climate of de escalation. But in the end it might not be enough.

The High Stakes Tango of Trade

Naeem Aslam some chief investment officer at London's Zaye Capital Markets calls this whole thing a 'high stakes tango' with July 9th as the next 'flashpoint.' He warns that Trump's 'America first bravado' could turn negotiations into a 'slugfest,' rattling supply chains and causing inflation. Sectors like tech and industrials are especially 'braced for whiplash.' He even says 'Markets will hang on every tweet and trade talk whisper.' Sounds about right. Just another day in the arena folks. Just another day in the arena. And just when you think it's safe boomslang!

Buckle Up Buttercup: This Ride's Far From Over

So what's the moral of the story? 'Buckle up,' as Aslam puts it. This trade war saga is far from over. We're all just pawns in someone else's game aren't we? But hey at least we're not fighting for survival in a televised death match... yet. Stay alert keep your eyes peeled and may the odds be ever in your favor... or at least neutral.