The theme shifts from growth rate and interest rate gaps to risk-averse movements [Jiro Ota]
Jiro Ota Profile
Ota Jiro. FX Strategist. Began FX trading in 1979 at The First National Bank of Boston Tokyo Branch. Later he worked in corporate FX trading at Manufacturers Hanover Trust Bank, BHF Bank, National Westminster Bank, and ING Bank, then moved into retail FX, operated at GFT Tokyo as a sales representative, later gained experience as a Market Strategist, and is currently active as an individual investor.
※This article is a reproduction and edited version of an article from FX Guide.com June 2018 issue. Please note that the market information written in the text differs from current market conditions.
Risks of a Trade War
President Trump decided unilaterally to impose import tariffs of 25% on steel and 10% on aluminum for all countries. However, Canada and Mexico, members of NAFTA, were granted exemptions, and the European Union (EU), Australia, Argentina, Brazil, and South Korea are expected to be exempt for the time being. Regarding Japan, negotiations for a Free Trade Agreement (FTA) are desired, and there were reports that the United States is seeking to reduce its trade deficit with China by $100 billion.
On March 22, as a countermeasure against intellectual property infringements and forced technology transfers by Chinese companies, the United States invoked Section 301 of the Trade Act, deciding on sanctions of $50 billion per year outside of normal tariffs. Also, on March 15, the U.S. International Trade Commission (ITC) issued a final ruling that U.S. companies are harmed by imports of Chinese-made aluminum foil, confirming the application of punitive tariffs on Chinese goods, making Chinese retaliation tariffs seem unavoidable.
Pressure is mounting on the EU and Japan to take import restrictions to reduce the U.S. trade deficit; the EU has pushed back against these measures. Plans for retaliatory tariffs are being prepared, listing around 100 targeted items such as motorcycles, jeans, shoes, cosmetics, and bourbon, raising concerns about a full-scale trade war.
