+ will there be a tradewar? most likely +

  1. 22,691 Posts.
    When the USD Index rose fron 80.8 to the now 85.11(+5.3%), people started smiling.

    And they pointed to the Euro which had fallen from 1.36 to the now 1.277 (-6.6%).

    Unfortunately, in the real world, Europe would be smiling as it can compete better in the US and in those countries which are linked to the $US. Also, the pressure came of this currency at the same time.

    US exports will be dearer also when imported by Europe or other countries, so the US export rate could be down and the Trade Deficit will increase, given time.
    Imports into the US could be somewhat cheaper and we shall be waiting on the Consumer reports.

    US OUTSOURCING is continuing and while this means cheap goods going into the US, one Commentator correctly said that we miss the multiplier effect compared with making the products in the US.

    To reflate an economy, the multiplier effect (Make the money go round) is an important function. It is not the same without a full multiplier effect.
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    As soon as the US notices that the trade deficit gets worse, expect them to act. There will be an exchange between them and other countries, each pointing out the protective measures the other party has taken.

    Sofar, there has been a procedure to deal with this but expect hot exchanges and action. The US being squeezed on the trade front will be a leader in these skirmishes, particularly with the Senators wanting action.

    Yes, it will be ugly indeed.

    Gerry

 
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