U.S. Trade Wars Enter Dangerous New Phase
The trade war between the U.S., China, EU and other countries has been heating up for a few months now.
Here are some revelations about this trade war (so far), specific to China:
In spite of these revelations and a host of others, the Trump Administration still insists on pursuing these protectionist measures. But that stubborn insistence may now be harboring new consequences.
It appears the trade war is entering a dangerous new phase in the form of a currency war.
It’s “par for the course” escalations started with a tweet from POTUS, accusing China and the EU of manipulating their currencies and interest rates:
According to CBS News China and the EU did this to “get an edge over the United States by making their goods and services cheaper to buy in the U.S.”
Shortly after the tweet, the “Dollar to Euro” exchange dipped, as seen in the chart below from a different CBS report:
It looks like the dollar is weakening, so it seems that whatever the EU and China are doing is starting to work.
And Goldman Sachs also confirmed that the strategy is working in a stern warning issued to its own clients (emphasis ours):
When you poke a bear through the cage long enough, that bear will eventually lash out. It looks like the U.S. agitated the “bear” long enough for it to bite.
The Global Currency Wars Have Arrived – On Multiple Fronts
Even top-ranked currency strategist Jens Nordvig thinks “broad-based unravelling of the global trade and currency cooperation” is at risk because of this development.
This could be proof once and for all that the U.S. dollar may in fact be the victim of its own success.
And these currency war developments are serious business. Jim Rickards has even issued his own stern summaryof what seems to be playing out:
The ripple effects of these currency war escalations include market panic, a weakening dollar, and rising oil prices, among other things.
But most importantly, if the U.S. loses control of global trade because the dollar is no longer central reserve currency, the results could be dire for the economy.
And on cue, the yuan is weakening, prompting examination by the U.S. for currency manipulation.
It begs the question, is all of this the beginning of the end for the dollar? And if so, is this a big sign the U.S. may be heading for recession?
Shield Your Portfolio Against “Currency War” Ripple Effects
These trade tensions didn’t just start yesterday. In fact, they’ve been brewing since 2015. Plus, other global competitors like the EU seem to be following China’s lead.
Don’t let your portfolio become “currency war collateral.” U.S. protectionism seems to be backfiring, and China won’t be letting up any time soon.
Put some “currency cushion” in your portfolio before your retirement has a hard landing.
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