How Are Markets Reacting to Trump's Tariffs

Marc Ostwald, Chief Economist & Global Strategist at ADM ISI, spoke to CGTN Europe about the global market's response to Trump’s tariffs.

Transcript

00:00Now as Donald Trump suspends some of his tariffs, let's take a look at how European stock markets

00:05are reacting. In Germany, the DAX is up very slightly 0.2%. In the United Kingdom, the FTSE

00:13is 0.4% higher. And in the broader market, the stock 600 ended in modestly positive territory.

00:22So how are the latest developments in the trade war likely to be received by investors

00:27in the United States? Mark Oswald is Chief Economist and Global Strategist at ADM Investor

00:33Services International and joins us now. Hello, Mark. We're seeing quite a muted response

00:39in Europe. We did see big reaction in the US initially. Has everything calmed down?

00:45Has it all been priced in? To a certain extent, I think markets are beginning to learn to

00:52not jump at every announcement, particularly given the to and fro that we had on the Colombia

00:59tariffs, the to and fro that we've got now on the Canadian and Mexican tariffs,

01:06a measured response from China in terms of retaliatory measures. There is a huge amount

01:15of uncertainty. And it's the real danger for markets is to become whipsawed at every announcement

01:26and or every suspension of tariffs for a short period. And markets are basically just getting

01:35back used to this modus operandi, which they had sort of to a certain extent unlearned over the

01:42past four years of the Biden administration. It doesn't mean that they've been desensitized,

01:48but it certainly means that there is a realization that jumping literally at every announcement

01:54is probably not a very good way to make an investment decision.

01:58Yeah, you spoke about uncertainty. If we look what's just happened within a 12 hour period

02:03around the US Postal Service, first of all, saying those small parcels coming from China

02:08that are normally exempt under this de minimis rule, which means anything under $800 doesn't

02:13get a tariff charge, those parcels are not going to be accepted. Now those parcels are,

02:18but it's not sure what's going to happen with the tariffs and when.

02:22What do you make of that? What is the signal that it's sending?

02:26Well, I think the most important thing for everybody to understand, particularly in terms

02:30of the US-China trade relationship, is the dialogue that is going to happen very soon

02:37between Mr. Trump and Mr. Xi is going to be key to all of this to see whether this becomes

02:44an escalated situation or not. I think the other thing that people also need to bear in mind

02:50strongly here is this is a very different situation to where we were during the first

02:56administration, because then Chinese exports to the US were about 28-29% of total Chinese exports.

03:05That's down to 18 now, and the emerging market part of it has gone from 28-38%.

03:12So there is, to a certain extent, less sensitivity on the Chinese side, but it's still a very

03:20sensitive relationship. Apple, of course, has got quite a strong presence in China. We're hearing

03:25now that China wants to look into the fees that Apple is charging. What do you make of that? Do

03:32you see that as all part of this twatat? It certainly is, and it's not only a case of China.

03:42The EU, as and when tariffs are slapped on the EU, as Mr. Trump has promised,

03:49will also look to go after the US tech sector, particularly as Mr. Trump has now abandoned

03:55or said that basically the US will not join the corporate tax agreement.

04:02So the digital services tax is definitely on the board. So the US tech sector, which everyone's

04:11heavily invested in, is obviously a very easy one to go after. What makes it more complicated,

04:20as we also have on top of all of that, is the investment that the US tech sector is making

04:27in AI really viable? Particularly, there was a very bad reaction to the Alphabet results yesterday

04:34after their vast increase in spending on AI. All right. Thank you so much for your time,

04:42Mark Oswald, Chief Economist and Global Strategist at ADM Investor Services.