New EU Trade War Indicator Threatens U.S. Markets


This month, the S&P 500 has seen some steady rising action, starting out below $2800 and rising up to near $2900 as of yesterday. However, today traders are taking the edge off, while meanwhile the Dow slumps just a little bit from prior highs.

Looking to clues on why five day charts may be rocky, we come across an interesting new concern about global trade.

U.S. markets spent months under the gun as speculators tried to figure out what will happen with U.S./China trade relations. Largely spurred by the actions of a volatile White House, China and America threw potential tariff barbs at each other consistently. Then everything seemed to calm down, and the markets responded positively.

Today, we have brand-new reports that suggest the same White House is looking at possible tariffs on European products.

“President Donald Trump just announced plans for a new round of U.S. tariffs on European products,” reported Cardiff Garcia at NPR yesterday.

Some of the potential trade conflict centers around Boeing, which has had a rough year by any measure. Other issues include American criticism of European subsidies for Airbus designs. So while is largely an airplane war, other commodities may also be affected such as cheese, motorcycles and fancy snails.

All of this has its impacts on markets, which Nasdaq writers described this way this morning:

“World stocks slipped below the six-month high they reached earlier this week as U.S. President Donald Trump threatened more tariffs against the European Union, though the prospect of European Central Bank largesse kept them from falling too far.

Trump threatened on Tuesday to impose tariffs on $11 billion worth of EU products in a long-running dispute over aircraft subsidies, opening a new front in his global trade war.”

All of this trade flux seems to be laid at the feet of an American strategy that many economists find short-sighted and foolish.

“Damage already has been done,” wrote Anthony Rowley at SCMP March 17, providing concrete economic data showing the folly of the U.S> China trade debacle, and by proxy, any new front in this ‘war on free trade.’ “Even in the highly unlikely event that Trump were to call off his belligerence, the damage will sill be felt. Economic slowdown has gained a momentum of its own irrespective of what Trump does now. He and others are deluded in clinging to the idea of rapid recovery once the White House ends hostilities. … Just how deluded must be obvious to anyone who cares to read the latest Interim Economic Outlook by the Organisation of Economic Cooperation and Development (OECD). It offers a very lucid and concise of summary of what’s going on and is recommended reading not only for the White House but also for financial markets.”

Unlike with many other kinds of market news, investors are left with the unsettling feeling that we are burning money for no reason. Keep an eye on indices to see, in one economist’s words, just how far the markets can rally under unnecessary and imbecilic types of pressure.