Pyrrhic War

The trade dispute develops into a seemingly endless back and forth of tariff increases by the US government and counter-reactions by the Chinese government. The official goal of the USA is to continue to reach a trade agreement with China. The Chinese government’s willingness to talk is to be increased with these measures. Of course, so far the tariff increases have also had an effect. The growth momentum of the Chinese economy has slowed. However, the question remains as to whether the higher US tariffs on Chinese goods will actually affect China to such an extent that in the end far-reaching concessions will be made. The tariffs could also become a boomerang if consumers are confronted with higher prices. If US President Trump’s price gains then fall, the US President could quickly find himself in a state of emergency.

The collateral damage of this policy – weaker world growth, lower investments and falling stock markets – already offers a foretaste. But the guilty party has already been identified, namely the US Federal Reserve. US President Trump is convinced that the Fed only needs to cut central bank interest rates sharply in order for growth to pick up again. Irrespective of the fact that political advice of this kind is not helpful, many players do not believe that interest rate cuts will continue to be a panacea. The US government’s confrontational policy style is likely to cost growth in the medium term, irrespective of possible rate cuts.

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