tit: The Twisting Tides of Trade Wars: An Unsettling Saga for Global Economies and Markets
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The dance of the titans - Trump and Xi - took a turn as the world watched the ebb and flow of their game of trade tariffs. As June dawned, stock markets rose and the dollar strengthened, leaving investors tentatively hopeful while cautiously monitoring the trade spat between the titans.
Last week, Trump cried foul, accusing Beijing of breaking the initial truce they had cobbled together on May 12. The U.S. President had reduced tariffs on Chinese goods from a gut-wrenching 145% to a more manageable 30%. In response, China lowered its tariffs on American imports to 10%. The once rocky relationship, however, showed no signs of smooth sailing, with both sides facing demands and deadlocks in finding a common ground.
The phone call between Trump and Xi offered a glimmer of hope, both agreeing to revisit the negotiating table "shortly." To many, the trade wars were approaching a standoff that would test the mettle of these ostentatious titans. Challenges loomed large, hinging on export controls and delivery disputes, leaving the path to resolution uniquely steep.
On the homefront, investors played a waiting game while largely ignoring negative news tied to Trump's tariffs and the economy. Many clung to the belief that Trump's trade wars would soon end. This stubborn optimism might be rooted in the "TACO" (Trump Always Chickens Out) effect, a perspective shared by some analysts. Both the Chinese and U.S. markets performed well, with Hong Kong and Shanghai markets closing higher, and Wall Street experiencing solid gains.
The political landscape in Europe took a tumultuous turn as the Dutch government collapsed. Far-right Dutch leader Geert Wilders withdrew his party from the government over a heated immigration debate, leading to political instability in the Netherlands, the fifth-largest economy in the European Union (EU) and a vital exporter. The EU's inflation rate dipped in May to its lowest level in eight months, barely grazing the European Central Bank's 2% target. The anticipated ECB interest rate cut would put pressure on the euro.
As companies jostled for positions, Nvidia shares edged up 2.8% to surpass Microsoft and become the biggest US company by market value.
The Heart of the Matter
Investors keep a keen eye on the trade negotiations sidelines, where the U.S. and China are due to meet at an Organization for Economic Cooperation and Development (OECD) ministerial meeting in Paris on Wednesday. The trade talks have significant implications for the world's largest economies and markets.
The OECD recently downgraded its 2025 global growth outlook to 2.9% from the earlier 3.1%. Worryingly, the U.S. growth rate is now forecasted at a mere 1.6%, down from an initial estimate of 2.2%. The OECD warned that heightened trade barriers, tighter financial conditions, shaky consumer sentiment, and escalating policy uncertainty would all contribute to "devastating consequences" if they persist. Alvaro Pereira, the OECD's chief economist, urged both nations to focus on the bigger picture and work towards a long-term agreement.
Data from Tuesday showed Chinese factory activity shrinking at its fastest pace since September 2022, adding to the concerns over economic stability.
The passage of Trump's signature "big, beautiful bill" was under scrutiny, with senators preparing for heated debates. The proposed policy package included substantial tax cuts (US$3.0 trillion or RM12.7 trillion) that could push the U.S. further into debt at a time when concerns over the country's fiscal health are at an all-time high. The plan also earmarked budget cuts that would potentially strip healthcare from millions of low-income Americans.
Trade talks, although uncertain, continue to shape the future of the world's economies and markets. Investors remain guarded and eager, watching as the dance of the titans unfolds. The path to a lasting resolution is long, fraught with challenges, and filled with unpredictable twists and turns.
- The dance of the titans - Trump and Xi - continues, as their ongoing trade tariff negotiations significantly influence global economies and markets.
- As political leaders negotiate, investors are closely monitoring the sidelines, with the U.S. and China due to meet at an Organization for Economic Cooperation and Development (OECD) ministerial meeting in Paris.
- The OECD has downgraded its 2025 global growth outlook, citing concerns over heightened trade barriers, tighter financial conditions, shaky consumer sentiment, and escalating policy uncertainty.
- In the face of economic instability, the passage of President Trump's signature policy package is under scrutiny, with senators preparing for heated debates over the proposed tax cuts, budget cuts, and potential impact on healthcare for low-income Americans.
- Meanwhile, the Dutch government's collapse creates political instability within the Netherlands, the fifth-largest economy in the European Union (EU), and a vital exporter.
- The evolution of this global trade saga also affects the world's biggest companies; for instance, Nvidia surpassed Microsoft to become the biggest US company by market value.
