The gloves appear to be off in the latest threat to global peace and security – that’s his words – as on Saturday President Trump ramped up the pressure on Denmark, Europe and NATO to come to a deal for the peaceful handover of Greenland to the USA.
He announced that there would be an extra 10% tariffs on goods from eight European countries including the UK, Germany and France, potentially rising to 25% in the summer.
Europe is still considering its response but the mood seems more pugnacious than in its dealings with Trump’s White House last year. Some €93bn of tariffs on US goods and restrictions on US companies in Europe had been planned as retaliation but never put into operation last year as a trade deal, seen as highly advantageous to the USA, had been agreed. That now looks under threat.
This morning so far exchange rates have barely moved. Even so, it promises to be a highly charged week on the currency and stock markets. Often they go hand in hand, with the pound moving up and down in alignment with share prices. Today’s public holiday in the USA for Martin Luther King Jr Day is likely to mute the response for now.
With US economic growth far outstripping the rest of the G7, Trump is perhaps feeling relaxed about the impact of tariffs on the US economy, but for individual businesses the impact could be great. For the UK, the current economic picture will be revealed this week with most of the big numbers coming out, starting with unemployment and earnings tomorrow. While an interest rate cut at the start of February has largely been ruled out, there could still be an impact.
Last week the Australian dollar was in the ascendancy as the markets considered that it might be the first large economy to start raising interest rates. Over the past month it has gained 2% on the euro and others, and 1% on sterling.
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