Trade War Update: Market Not Prepared For More China Tariffs

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Despite better-than-expected GDP performance in the U.S., the EU and China in the first quarter, the trade war is now a variable for the Fed. The market is up on rate-cut bets and not on hopes for a truce with China in Osaka. “Central bank responses will not fully compensate for the impact of rising trade uncertainties on investment spending and the adverse supply-side impact of tariff hikes and trade restrictions,” said Coulton.

Fitch did manage to upgrade its 2019 forecast for the U.S., the euro zone, the U.K. and China due to strong first-quarter earnings. Brazil, Mexico, Russia, Korea, South Africa, Canada and Australia are all expected to underperform, growing less than originally forecast.

The market will balance out.

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