Journal of Kuwait The prisoner's dilemma … America begins a trade war

Trump may think that radical actions will repel others, a danger that could be costly if China decides to retaliate. When South Korea was threatened with steel and aluminum designs, it quickly made concessions to avoid these costs, which is far less likely for China.

Although there is no technical definition of "trade war", the world seems to be moving towards this war. On Friday, the administration of President Trump not only imposed new duties on $ 34 billion in annual Chinese imports, but it also threatened to extend tariffs to include all goods imported from China . This new and very dramatic escalation threatens $ 500 billion worth of Chinese goods and risks turning this series of trade disputes into a large-scale trade war.

Trump might think that these extreme measures will repel others, a risk that could be costly if China decided to retaliate. When South Korea was threatened with steel and aluminum costs, it quickly made concessions to avoid these costs, which is far less likely for China.

According to NBK's weekly report, Trump continues, even with his "allies" using the same strategy. This is at least surprising, especially after the European Union has described it as "bad", like China, in the way European countries trade with America.

After reciprocal exchange, Trump ordered a national security investigation on imported cars and parts. Achieve a similar cause of the series of events of steel and aluminum). Trump is supposed to consider a surcharge of 25%, this time on cars and parts. An analysis predicts that it will cost 195,000 jobs in America, three times more than in the affected countries (often the main allies of the United States). As for Canada and Mexico, Trump has not shown any affection for his neighbors. After the drawings on steel and aluminum were put into practice, the two neighbors refused to back down, and their response was to charge America.

Overall, there is much to be done if silent minds do not control the situation. Although everyone is a loser, the parties involved still struggle to cooperate in this prisoner dilemma (two parties working to protect their interests in a logical way, but the result is worse than if we cooperate.)

Trump Believes he has a preference, Susceptible to withdraw quickly unless he thinks otherwise. In fact, he is more likely to do what he does as long as he has the authority to do it. On the other hand, China, the European Union, Canada, Mexico and all those affected by the cartoons will continue to respond. The end will depend on the amount of economic damage that each party can sustain. Over the weekend, the Bureau of Labor Statistics reported 213,000 non-farm jobs in America last month, exceeding market expectations of 195,000. At the same time, the unemployment rate went from its lowest level in 18 years to 3.8% at 4%, the first increase in 10 months with entry into the labor market, a sign of confidence in the labor market. As for wages, they went from one year to the other at 2.8%. Wages increased month-to-month by 0.2 percent. The steady rise in wages has highlighted moderate inflationary pressures, which should keep the US Federal Reserve in a gradual rise in interest rates.

Minutes of the Federal Reserve Meeting

The FOMC said policymakers could soon announce that the interest rate hike was sufficiently advanced for the Commission to revert to a policy that would was neither favorable nor unlimited.

Council decision makers also noted that "uncertainty and associated risks Trade policy has increased, and Bulimia fears that uncertainty and the risk that this may have negative effects later" at During their last meeting, while the probability of a third increase in September was 77%, the possibility of a fourth increase in 2018, which was widely discussed, remained at 50%. [19659009] Strong figures from the US service

After four consecutive periods of slowdown The US service sector finally increased in June. The non-manufacturing PMI index of the Production Management Institute, a Leading indicator of economic health, was 59.1, higher than the market forecast of 58.3 .This figure could indicate that the US economy experienced a second quarter after a modest start this year. This is all the more true as the services sector accounts for about 80% of US GDP.

Foreign Exchange

The dollar ended almost the same week, but a pullback at the end of the week meant a drop of 0.62%. This had an impact on all major currencies that benefited from the decline in the dollar. The euro peaked at 1.1767 in three weeks after the threat of America and China to charge billions of dollars of goods became a reality, although the concern aroused by escalating the conflict has reduced the appetite for risk. At the same time, the pound was able to gradually increase over the last week, peaking at two weeks of 1.3290.

UK Services Boom

Disappointing British data ended a month after the end of this week, thanks to the recovery of the purchasing managers' indices. The services sector rebounded in June, the largest sector of the British economy. The services PMI rose to 55.1, its highest level in 8 months, supported by rising new orders and corporate optimism.

Like the other minor components, the index of new orders rose 2 points to 13 months, Also the price index of production, but to its highest level in just 3 months. Earlier this week, the manufacturing and construction sectors also increased, further strengthening the Bank of England's monetary policy. The possibility of a rate hike in August was 65% after the PMI figures for services. Overall, the latest PMI data provided a positive light on the British economy, while supporting the bank 's view that the first quarter figures were provisional

The bank European central is confident about future inflation

He said Tuesday that he was confident that euro-zone inflation would continue to grow at less than 2% even after the end of his massive bond buying program: "The strength inherent in the euro area economy". Parallel to firm inflation expectations The term futures gives confidence that the sustained trend of inflation towards the target rate will continue in the coming period, even after the gradual end of net purchases of money. assets.

Trump bounces OPEC

Whatever it is, Trump is not afraid to test the design of his allies, And criticized the "OPEC" and the pressure on the closest allies from America, warning them to manipulate the oil markets. After complaining of rising oil prices, the US president said OPEC is expected to provide 2 million barrels in the market to make up for the lack of crude oil because of the sanctions. But despite OPEC's approval to increase production, oil prices have steadily risen as Libyan and Venezuelan production has fallen, and Iranian exports are expected to fall further than Saudi Arabia's. Had promised. Now, Trump is calling on OPEC to do more to lower prices. Brent oil finished the week at $ 77.29

Solid economic data in China

For the economy, the index of composite purchasing managers (including manufacturing and manufacturing industries) services) showed that activity continued to grow at the end of the second quarter. The services sector grew at its fastest pace in four months in June, with an index rising from 52.9 to 53.9

At the same time, manufacturing output also rose to its highest level in four months. But growth rates in both sectors remained lower than those observed at the beginning of the year. China's economy has been strongly oriented towards services and consumption. Thus, domestic demand plays an increasingly important role in growth. Future costs may decline in the short term, but flexible domestic demand will continue to support growth, providing some protection against external risks. The currency of the population, also known as the renminbi, experienced one of its biggest rises in a day last week, up against the dollar. Market participants attributed the move to the strong purchase of state-owned banks. But then, the currency seemed to stabilize because of the apparent interference of Chinese government banks. The 3.3% drop in the Chinese currency in June was the worst. The yuan reached 6.6396 before the weekend.