Sanctions against Mexico? By Blackfort CIO Dr. Andreas Bickel
Sanctions against Mexico?
Another tweet, new tariffs on Mexican exports…. Forecasting erratic political external shocks is impossible. The impact of these tweets are significant: For instance a negative 10y3m yield spread in the US, German bund yields have reached a record low yield level, stock markets trade at or below the 200 day average. China’s PMI below 50…. All soft indicators tell us one thing: Be cautious.
The negative effect of the new announced tariffs on Mexican goods imported to the US can have a significant impact on US GDP. According to UBS USD 352bn of good were in 2018 imported from Mexico. Recently that figure has risen sharply because some goods originally imported from China were substituted by Mexican goods.
What does a new NAFTA agreement help if only month’s later new tariffs are imposed? So why shall China sing an agreement? China is a smarter and especially a much larger “poker player” than Mexico. The recent threat to limit the export of rare earth shows that China can hurt the US much stronger than vice versa. Europe was this week as well on the tweet agenda and tariffs were mentioned to discipline the Europeans not to deal with Iran.
In the end, we will all lose. The US-recession risk has risen over night significantly. A trade war cannot be won easily… by the contrary.
Source: https://www.linkedin.com/feed/update/urn:li:activity:6540228251313283072
Published: 07.06.2019 by Blackfort CIO Dr. Andreas Bickel
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