US: The trade war is just starting

Bloomberg

Billionaires, world leaders and investors are gathered in Davos, Switzerland, for the World Economic Forum’s annual meeting to hobnob and discuss topics ranging from the global economy and
harassment, to the risks and opportunities of artificial intelligence. Not to mention hear a speech by US President Donald Trump.
The second day at Davos saw German Chancellor Angela Merkel, French President Emmanuel Macron and US Treasury Secretary Steven Mnuchin among those attending the global event.
Jacob Frenkel, chairman of JPMorgan Chase International, said a currency war must be prevented at all costs, as the consequences would be “devastating” for the global economy.
“A currency war in the monetary sphere is the mirror image of protectionism in the real sphere,” he said in an interview with Bloomberg Television, adding that “we should prevent it at all costs.”
Alibaba gets scared of weaponised trade. It’s easy to launch a trade war but difficult to prevent the disastrous fallout, Alibaba’s Executive Chairman Jack Ma said during a panel discussion. “I am scared. I am concerned. Don’t use trade as a weapon.”
National governments have a duty to protect their citizens and markets, but the principles of free trade must not be called into question, Italian Prime Minister Paolo Gentiloni said. Italian policymakers must continue with economic reforms after the March 4 election, he added.
Further measures to encourage international investors and make the world’s second-largest economy more accessible are on the agenda for China at a time when the threat of a full-scale trade war with the US is rising. Liu He, the top financial and economic adviser to President Xi Jinping, said economic globalisation should be more “open, inclusive and balanced,” echoing Chinese President Xi’s remarks in 2017, when he urged business and political elites to reject trade war and protectionism.
Poland is cutting red tape for businesses and believes a slowly strengthening zloty is good for the economy, Prime Minister Mateusz Morawiecki said.
“If it is going too quickly, too strong, I would start to be slightly concerned with this, but today everything is okay,” Morawiecki said in an interview with Bloomberg Television.
Ahead of President Donald Trump’s speech later this week, US administration official laid the ground work by signalling a toughening stance on trade. “A trade war has been in place for quite a little while, the difference is the US troops are now coming to the rampart,” Commerce Secretary Wilbur Ross said. Breaking with traditional US policy of support for a strong currency, Treasury Secretary Steven Mnuchin endorsed the dollar’s decline as a benefit to the US economy.
Given that inflation is at target, it makes sense for the Riksbank to begin tightening monetary policy a bit earlier than the European Central Bank, Deputy Governor
Cecilia Skingsley said. The Riksbank’s forecast sees room for normalisation and risks are balanced, Skingsley said in an interview with Bloomberg Television.
A more robust European single market rather than a trade war will be the “ right answer” to challenges presented by protectionist policies such as the tariffs imposed by US President Donald Trump, according to Portuguese Finance Minister Mario Centeno.
“We are always worried about protectionist policies, which I really don’t think is the way to lead our economies,” said Centeno, who on Monday had his debut presiding over the gatherings of euro-area finance ministers. “But we have to be ready and prepared to respond to that with the highest levels of competitiveness from our side.”
The US Treasury Department’s compilation of its first official list of “oligarchs” close to President Vladimir Putin constitutes “ economic war,” VTB Group CEO Andrey Kostin said. “I’m not so much concerned about personal sanctions, which would be the least evil, but of course any further sanctions on Russian financial institutions would substantially undermine our relationship with America,” Kostin said.
Europe’s youth risk being left behind unless the European Union takes steps to address the growing income divide across generations, IMF Managing Director Christine Lagarde said. “Working-age people, and especially the young, are falling behind,” she said. “Without action, a generation may never be able to recover.”
The Trump administration is not concerned about the US Treasury market, with Mnuchin saying the market is “one of the largest and most liquid in the world. He added that the US government “couldn’t be happier” about the reactions to Trump’s tax reforms.
South Africa is in a much better place now than when previous credit-rating actions took place, according to Reserve Bank Governor Lesetja Kganyago.
Exporters are doing well, and the relative strength of the euro is no reason for nations in the single currency area to be concerned, said Mario Centeno, the president of the Eurogroup of finance ministers. “Things are looking good, and I think they will continue like that,” Centeno said in an interview with Bloomberg Television.
“We have been able to show a lot of resilience to external shocks.”
UBS Group AG Chairman Axel Weber said the Swiss bank won’t trade bitcoin or offer it to retail clients as increased regulation could lead to a “massive” drop in value.
“This is something where the price is really unclear,” Weber said in an interview Wednesday with Bloomberg TV. “We fear that in the future if these investments implode and the market corrects, then investors will be looking at who sold us this.”
Proposals by some of Italy’s parties to take the country out of the euro have disappeared and political platforms are converging ahead of the March 4 vote, according to former Italian Prime Minister Mario Monti.
“We now have a convergence of all parties on accepting the European context,” Monti said in an interview with Bloomberg Television.
Turkey’s relations with European Union nations are improving after a rough patch last year, according to Deputy Prime Minister Mehmet Simsek. Turkey has begun a “good dialogue” with Germany and improvement is expected in ties with Austria and the Netherlands, Simsek said in an interview with BloombergHT.
Britain’s decision to leave the European Union is a “travesty,” according to Alexander Stubb, vice president of the European Investment Bank and a former prime minister of Finland. “Most of us are actually quite sad, and we think it’s a travesty, economically, politically and from a security perspective,” Stubb said in an interview with Bloomberg Television. “The eternal optimist in me hopes that the UK will either not leave or come back at some stage.”
When Liu He takes to the lectern in Davos later, the Harvard-educated technocrat will move further into the spotlight that’s been aimed at him since his elevation to China’s top political body in 2017.
“Liu will be like a Chinese version combining both Larry Summers and Ben Bernanke, plus the chairman of the president’s economic council,” according to Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong.
Have criticisms of Donald Trump’s economic policy gone too far? Whisper it quietly, but 12 months after the beginning of the Trump presidency, several economists and business leaders appear willing to give Trump and his tax reform a chance, Bloomberg View’s Ferdinando Giugliano writes.

China vows surprise reforms
Bloomberg

China will introduce more reform measures to open up its economy this year, according to Liu He, the top financial and economic adviser to President Xi Jinping. “Some measures will exceed the expectations of the international community,” Liu said. “Opening up is not only important for China, but also for the whole world.”
US warns of more trade measures ahead. There will be more measures coming,
US Commerce Secretary Wilbur Ross said when asked about President Donald Trump’s decision to impose tariffs on solar panels and washing machines.
“What has provoked a lot of the trade actions is inappropriate behaviour on the part of our counterparties,” Ross said.
A day before Trump’s scheduled arrival in the Swiss ski resort of Davos for the World Economic Forum’s annual meeting, Treasury Secretary Steven Mnuchin endorsed the dollar’s decline as a benefit to the American economy and Commerce Secretary Wilbur Ross said the US would fight harder to protect its exporters.