The world has thankfully stepped back from the abyss of a trade war. But a pervasive sense of foreboding stalks the markets in what might otherwise be a time of celebration, or relief at the very least. That dread, however, is unlikely to abate until the US elects its 48th president.
The 47th iteration, Donald Trump, shocked markets when he announced a 90 day reprieve on additional tariffs for almost every country on his extensive list. Only China was singled out, with a 125% tax on its exports to the US.
China has not backed down, raising its tariff on US goods to 84%. This means there is now effectively a trade embargo between the world’s two biggest economies.
It’s impossible to be especially happy with this outcome. Trump has shown, whether purposefully or through recklessness, how little care he has for the financial markets — and by extension working people's pensions and investments — and the US political system has shown how powerless it is to reign him in.
Some of the strongman leaders Trump so seems to admire, and who run far more autocratic regimes, must be yearning to run liberal democracies with all their checks and balances if this is the sort of autonomy it gives the person at the top.
Back in the capital markets, many issuers and investors see this 90 day window as a brief spell in which to resume regular bond issuance.
The first salvo of those new issues on Thursday went well, with Australia’s Transurban a standout for landing a deal in euros and sterling that would be considered blowout even in good times.
Crucially for European markets, the 90 day reprieve falls over May, which is usually a busy time for issuers. There is a high chance this window will be much busier than usual simply because of the fog that lies ahead.
Markets hate uncertainty, and there is no bigger source of it than a US president seemingly willing and able to start a global trade war based on questionable maths.
Enjoy the good times now, such as they are, because what comes next is anyone’s guess.