Trump's trade tantrum disrupts many sectors

SINGAPORE (July 9): US President Donald Trump will travel to Brussels on July 11 and 12 for a North Atlantic Treaty Organization summit. The members of NATO include six of the seven countries that comprise the G7. The last time he met with his European allies and Canada, Trump unleashed a Twitter storm and exacerbated a trade war. On July 1, the European Union indicated it may impose tariffs on US$300 billion ($410.4 billion) worth of US auto and auto parts, in retaliation to the US threat to levy a 25% tariff on EU imports.

Since the G7 summit on June 8 and 9, the US dollar has strengthened against nearly all of the US’ trading partners. And, among the top four countries with which the US has a trade deficit, the US dollar has strengthened the most against the renminbi.

Could a weaker RMB help shore up China’s export industries in the event of widespread tariffs implemented by the current US administration? Lukman Otunuga, research analyst at FXTM, says: “The [RMB’s] steep depreciation in recent days has fuelled speculation over China’s weakening the local currency in preparation of a potential global trade war. While the RMB’s depreciation could mitigate some of the negative effects of trade tariffs imposed by the US, it could spark fears of a currency war. It must be kept in mind that the RMB’s decline has been mostly based on external factors — namely, global trade fears and a broadly stronger US dollar.”

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