Latest news with #worldtrade
Daily Mail
3 days ago
- Business
- Daily Mail
HAMISH MCRAE: Rules are rules when it comes to trade... until all the major players ignore them
You cannot, Mr Bailey, get the toothpaste back into the tube. Last week the Governor of the Bank of England, Andrew Bailey, gave a speech to investment managers in Dublin on how important world trade was to global growth and how the system had to be reformed. So far, so good. But when you go through the detail it was all about trying to rebuild trading relations with Europe and how to make the so-called 'rules based' world trade system work better. And the problem there is that the world has changed. The UK will not go back to anything like a pre-Brexit relationship with Europe, and the US will not go back to a pre-Trump approach to global trade. The task for British political and financial leaders is to exploit the opportunities that have arisen, rather than hark back to a none-too-brilliant past. On Brexit, the Governor was careful to make the disclaimer that as a public servant he didn't take a position on it, but what he said had a clear spin. We had to 'minimise negative effects on trade' and that the changing relationship with Europe has 'weighed on the level of potential supply'. At least he didn't cite the Office for National Statistics' calculation that in the long run Brexit would cost 4 per cent of national output. On that figure I prefer the comment of one of his predecessors, Mervyn King, arguably the most notable UK economist of his generation: 'They can't possibly know that. They just make it up.' Nor did Bailey refer to the determined drive by Europe to make banks shift their business and people to EU centres, including Dublin. Instead it was all about trade in finance being 'a two-way street', failing to mention that the UK has a huge surplus on exports of financial services, or indeed that there were 678,000 jobs in the City of London at the end of 2023, some 30 per cent more than in 2016. Of course we need as good a relationship as possible with all trading partners, but we need to acknowledge that, insofar as the City has been successful post-Brexit, it is despite hostility from Europe. As the still bubbling row about transferring euro-derivatives clearing from London to the EU shows, realistically that hostility will continue. On world trade the Governor acknowledged that the system has come under too much strain 'and it is incorrect to dismiss those who argue for restrictions on trade as just wrong-headed'. And the blame for imposing that strain goes mainly to China, which as he noted, heavily subsidised key industries to help them dominate world markets. China imposed 5,400 'subsidy policies' between 2009 and 2022, two-thirds of the global total. He made the point, too, that it was reasonable for countries to seek security of supply, but suggested they do so by dealing with reliable partners rather than trying to bring production back home. These are sensible comments, in particular acknowledging that Donald Trump has a point and China has abused global trading rules. He notes the damage done to trade by Covid and Russia's invasion of Ukraine. He points out how important trade in services is, particularly for the UK. It's an interesting, thoughtful and conventional analysis, and maybe that is what we should expect from a central banker – but I fear it is a naive one. Why? Take Europe. There is a huge trading imbalance between the UK and EU. They sell far more goods to us than they buy, and we export more services to them. But they are not going to change their rules to increase their imports of services. Take China. It's not going to stop subsidising its industries for fear of getting ticked off by the World Trade Organization. As for the US, it has given up on the whole International Monetary Fund-WTO system, that's that. So instead we have to negotiate our way through a bilateral trading world. The UK has made a good start. There are lots of reasons to attack our Government's financial policies, but doing deals with the US, the world's largest economy, and India, soon to be the third largest, deserves to be welcomed. We seem to have a slightly better relationship with Europe, and I don't see why we shouldn't get on with China. Let's try to be nice, as Andrew Bailey was in Dublin, but let's be aware that the rules-based order is dead.
Bloomberg
5 days ago
- Business
- Bloomberg
Bailey Discusses Fours Points on State of Trade
Bank of England Governor Andrew Bailey spoke at the Irish Association of Investment Managers Event in Dublin. He shared four points on the current state of world trade saying 'something has gone wrong' with the multilateral trade system and that the World Trade Organization cannot be abandoned. (Source: Bloomberg)
Globe and Mail
27-05-2025
- Business
- Globe and Mail
'Buy America', Keep Gold as Insurance, and…
The 'sell America' trade is getting a lot of attention these days, but it seems that enough is enough. The about-to-be-hiked tariffs for the EU were delayed by a month (precisely: to at least July 9), and it looks like we're getting the same kind of story as we've seen recently. First, a threat, then, escalation, which is followed by delay, putting pressure on the other side. Where does it all lead to? Likely to trade agreements that have ultimately increase the level of tariffs. I already wrote about the implications for the world trade (it's going to decline), for the stock markets (as above, they are likely to decline based on the trade obstacles), and I wrote about the fundamental implications for the U.S. dollar (they are bullish – with lower demand for foreign currencies given increase in their purchase prices due to tariffs). Today, I'd like to discuss one other aspect that remains unclear. It's about the coordinated response by the world economies to U.S. tariff hikes vs. independent reactions. In 1-on-1 talks, the U.S. has the advantage – it's the world's biggest economy, after all. But, if the rest of the world was to team up (or at least several major economies) and negotiate on the same front (like a trade union), the power would no longer be on the U.S. side. After all, despite the U.S. is the biggest economy, it's not as big as several of the other big economies taken together. The most detrimental situation to the U.S. would be having to negotiate with multiple economies at the same time that are already making deals among themselves. Trump knows this, which is why he's isolating the discussion. China was isolated first, and the entire focus / tariff burden was on it. With arrangements in place, time has come for the EU. Maybe Japan comes next (with implications for the Japanese yen)? So far, it seems that this policy is working – at least as far as we know based on the official communication. It's also possible that there are discussions being held to which the U.S. is not invited, but right now the former, straightforward interpretation seems more likely. If this continues, the terms for the U.S. will be more favorable, BUT the entire world trade, world economies and world stock markets are still likely to take a hit due to 'operation tariffs'. Is this how the markets perceive the situation? Absolutely not. It's 'sell America' all over the board. The world stocks are performing better than the U.S. stocks and the USD Index was slammed since the tariffs were announced. Does it make sense? Did the U.S. stop being the world's most powerful economy after April? With the most powerful army? With the biggest tech hub in the world, ready to capitalize from the AI growth (yes, the pricing of AI equities is likely too much, but the AI revolution has only begun)? No – what happened was that the non-U.S. produced goods will be more expensive for U.S. consumers. This will make them more expensive to U.S. companies and U.S. buyers, pushing inflation higher (which is likely to prevent the Fed from cutting rates). At the same time, the declining demand for non-U.S. products, would also diminish the demand for foreign currencies. Lower demand for them, means their lower values (compared to the value of the U.S. dollar). So, the U.S. dollar should move higher given the overall tariff increases. But no – the emotional reaction took precedent. Can the emotional reaction to events last? For some time, yes, but the time is against this kind of reaction, as the market is likely to come its senses. When? Perhaps when the statistics for May will start to arrive and we'll see the first signs of slowdown. This might affect stocks and commodity prices, and by 'affect', I mean that they could start to decline and then plunge. Won't the troubling statistics impact the USD? Back in 2008 and 2020, the troubling statistics benefitted the USD – it was only after massive money printing was announced that the USD declined in 2020. Won't the USD Index just keep on declining based on whatever is going on with the markets emotionally? No – at some point, enough is enough, and we have the technical analysis to tell us how far is too far and where are the levels that are likely to hold. (chart courtesy of The USD Index moved close to its recent low, but it doesn't seem to matter, as this year's bottom formed at a super-strong support area. Only one of the following support levels would be enough to trigger a major reversal and shift the sentiment, and we've got not one but three of them. Here they are: The rising support line based on the 2011 and mid-2021 bottoms The 38.2% Fibonacci retracement level based on the 2008 – 2022 rally The 61.8% Fibonacci retracement level based on the 2018 – 2022 rally All this, while we're relatively close to the middle of the year – which is when the USD Index tends to form major bottoms. I marked it on the above chart. The USD Index did not rally for the second month in a row, which might seem bearish, but it's not. If you look at how the USD Index performed before launching its biggest rallies in the previous years, you'll see that what we see now is in perfect tune with those patterns. In each case – when we saw those major bottoms in the USDX – the precious metals sector and copper declined profoundly. There's one case that's a bit different than the other ones – the 2021 bottom was a double-bottom pattern, so which bottom should we take into account? In my view, the second one as it's aligned seasonally – that second bottom formed in May, 2021. We've Been Net Long Gold, Remember? Before summarizing, I would like to emphasize something that many people seem to get wrong about my analyses. Namely, people sometimes say that I've been shorting gold, which is completely not true. There were a few local short trades in gold and there were a few local long trades in gold, but almost all of the time in the past months and years, I haven't been trading gold at all. In fact, we've been long gold for years through the insurance part of the portfolios. At the end of each Gold Trading Alert, there's a summary section, and one of its components is: 'Insurance capital (core part of the portfolio; our opinion): Full position. If you'd like to buy gold or silver (for example through your IRA – you get a guidebook on that over here), I suggest that you do so through one of the top gold dealers. ' This has been kept at 'full position' since its inception many years ago. Furthermore, if you click the 'portfolio' link above, you can read inside of the report that the insurance part of the portfolio (being long gold) should be kept intact 'even when you think that gold and silver may decline.' While I'm not telling anyone how much they should invest, the above report provides three sample portfolios (beginner, trader, and long-term investor), and they have the following sample weights: Beginner: 44.1% as insurance (being long gold), max. loss per trade 0.1% of capital (so, even if the size of the trade was put at 300% of the above, it would still be max loss of 0.3% of the capital) Trader: 17.6% as insurance (being long gold), max. loss per trade 2% Long-term investor: 33.6% (being long gold), max. loss per trade 1% Yes, I am writing in my analyses about gold, silver, and mining stocks, and I'm usually writing about gold as that's the simplest way to discuss the short- or medium-term outlook. However, it doesn't mean that I think that being out of the gold market completely is a good idea! Or that if I'm being bearish on gold, that I'm shorting gold, and not something else from the precious metals market (like miners or silver, which is the case right now). The bottom line is, if someone followed by Gold Trading Alerts indications, they were pretty much always net long gold with periodic hedges through mining stocks, and sometimes other assets. If this is surprising, please feel free to review ANY of the Gold Trading Alerts that I have posted in the recent years. The portfolio report is not linked once, but three times in each summary. === Thank you for reading the above free analysis. And for staying up-to-date with my thoughts on the market – I appreciate you taking them into account while making your own investment decisions. If you'd like to access my complete premium analysis, including specific technical targets for FCX (even options) and silver, detailed analysis of mining stocks, and comprehensive portfolio insights, consider subscribing to my Gold Trading Alerts or – if you want the best – our Diamond Package. If you're not ready to subscribe yet, I invite you to stay updated with our free analyses - sign up for our free gold newsletter now. Thank you. Przemyslaw K. Radomski, CFA Founder, Editor-in-chief
