By : U.S. President Donald announced a trade war with Friday, hiking tariffs on $200 billion worth of Chinese exports from 10% to 25%. On the same day, the price extended its uptrend after jumping above $6,000.
The two events did not share anything except a date. But, according to Ed van der Walt, they probably had an interesting connection.
The Bloomberg reporter theorized that investors were using as “trade-war play,” stating that President ’s decision to increase tariffs on Chinese imported goods could create geographic price arbitrage. Walt envisioned whether or not smugglers, the ones who would attempt to export Chinese products into the US illegally, were the ones who were purchasing .
“Tariffs create geographic price arbitrages, which encourages smuggling, which drives money off-grid, which fuels ,” said Walt as he connected the dots.
Wait.
Is the ultimate Trade-War play?— Ed van der Walt 🇿🇦🇬🇧 (@EdVanDerWalt)
Beyond the Smuggling Theory
Walter’s question-cum-analysis followed decade-long criticism of as a tool to drive underground economies. JP Morgan CEO Jamie Dimon once said the was a fraud and was only attractive to criminals. In a similar tone, Russia President Vladimir Putin said creates opportunities to launder funds, evade taxes and finance terrorism.
JPMorgan CEO Jamie Dimon says is a ‘fraud’ that will eventually blow up
— CNBC (@CNBC)
But to think it was the smugglers who were pumping since its bottom formation in December 2018 sounded far-fetched, especially when there were other important fundamental factors at play, such as the one propelled by Fidelity Investments. The Boston-based asset management firm recently announced that it would offer services to its institutional clients. The ’s rate jumped above $6,000, a pscychological level, right after the announcement.
The Macroeconomic Funda
At the same time, one cannot deny that investors were getting prepared to face the macroeconomic shortcomings – or even disasters – caused by the US- trade war. The International Monetary Fund (IMF) last year that a clash between the two super economies could leave the world more impoverished and dangerous. And President ’s latest decision embarks global finance to face its demon.
Donald is kicking-off the US- trade war again with tariffs on goods. | Source: Fred DUFOUR / AFP
Julian Evans-Pritchard, a senior economist at London-based Capital Economics, said could retaliate by doubling tariffs on US goods.
“They have a 25% tariff on agricultural commodity imports from the US, they could double that potentially,” he CNBC. “I think it’s a balancing act for them. They want to retaliate for political reasons. But actually, in economic terms probably, their best option would be to do nothing.”
An economic fallout between the two countries will have a direct impact on US consumers, believes Jacob Parker. The vice president of US- Business Council said the US industry and farmers, in particular, will face the maximum heat.
“It will decrease the competitiveness of American companies, reduce the efficiency of their global supply chains, and reverberate through the US economy. Pure and simple, this is a tax on the American consumer,” Parker told CNBC.
bitcoin Price Will Rise
Weak fundamentals in both the US and could prompt regional investors to offload their portfolio risks to . In the US only, which amounts to the maximum number of traders, the demand could surge as the Federal Reserve prepares the soft-landing pad for the economy. It would mean reducing interest rates and making borrowing cheaper, a move many analysts believe will further prompt investors to hedge in .
Usually when yield curves invert, a recession follows (see with timeframe “max”), so a recession is likely very near. And yes I think FED/ECB/BOJ will go for eternal QE/negative interest rates .. which is a mayor buying argument imo: = QE hedge
— planB (@100trillionUSD)
What Walt suggested was ’s potential or ongoing demand among smugglers. But, as discussed above, the could be more than just an underground monetary system.
The price is above $7,100 at the time of this writing after hitting an 8-month high near $7,500.
Published at Sun, 12 May 2019 14:40:11 +0000
