In just a year and a half, the feelings of the Eurozone have changed dramatically when looking at the US. Because on the other side of the Atlantic is no longer its most solid partner, especially for a commercial partner. The main economy on the planet that could be trusted to also give wings to growth at home. What they see is an erratic Administration. Such as capable of dynamiting international agreements and multilateral institutions. Along the way, destabilize markets and global trade at a sensitive time. And the helm of this shift is Donald Trump. The tax reform or his protectionist excesses, accumulate to form a “harmful link” refers to European Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici.
“One might think that, with friends like Trump, who needs enemies?” European Council President Donald Tusk said last week. Shortly before European leaders discussed how to minimize the damage from Hurricane Trump. The Commission also did not keep words in the spring economic forecasts. He pointed out that the acceleration in the rate hike of the Fed as a consequence of its fiscal reform. And the imbalance it could cause in the global supply chain, due to its protectionist moves, “it could derail the European expansion”.
Medium or Long Term Impact
The growth phase that the global economy was going through after the last recession was already facing difficulties. The market bubble, Chinese debt, huge corporate debt, and fears about the normalization of monetary policy hung on governments and businessmen. The accumulated debt to exit the last recession has not been digested, and the monetary authorities do not have resources anymore. Things will get more complicated from June if the Eurozone do not get a permanent Trump exemption from tariffs. If the European steel and aluminum are punished, the community block already has its counterattack prepared (with fees for US goods). It would start a commercial war with the volcanic American president with an uncertain end.
Meanwhile, the United States and China are on track to collide after the a series of trade demands that Beijing will never accept. If both giants are engaged in a commercial battle in the technological field could destabilize the global production chain and shake markets that are waiting for a spark to burst. Donald Trump assured the world elite in Davos in January that “America first did not mean America alone.” However, in half a year the US president has been responsible for unleashing a global-scale trade dispute with economic giants such as China and its old European allies.
It has dynamited the agreement with Iran to stop its nuclear program, triggering oil prices and placing in huge uncertainty for dozens of large Eurozone companies. Finally, its fiscal reform will serve to relaunch US growth in the short term. However, Brussels and the IMF agree that it could cause the Fed to accelerate the rate hike. Which would shake investors and impact the rest of central banks at a time of doubt.
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