The uncertainty that Trump's policy brings with it, through his many U-turns, his erratic statements and his cancellation of long-standing agreements and treaties. It seems that nothing can be relied upon anymore. The fact that this uncertainty is dampening business sentiment and thus growth prospects seems to be sufficiently present in the market and in the minds of market participants, Commerzbank's FX analyst Antje Praefcke notes.
Consumers may put pressure in the US growth
"There's the question for me as to whether the market and the US administration are already taking sufficient account of the fact that the current uncertainty caused by US trade policy could also have a massive impact on consumer behavior. If consumers stop spending because of fear of unemployment and rising prices, shy away from major purchases or even tighten their belts and go without, the great pillar of US growth will falter.
"If consumers become less active in the housing market due to high or even rising interest rates, or even experience payment difficulties, the pillar will crumble even more. If, on top of that, the stock market were to fall, drying up another source of income, even the last consumer would be affected. And once confidence in the future has been lost, it usually takes a long time for it to return – and with it, growth and the US's growth advantage. That would be a high price to pay."
"Trump and his supporters may call a possible economic downturn transitory. I am not so sure that a downturn during a raging trade war would be anything but transitory and that the US president's motivating slogans would be enough to keep US consumers in line – especially once they have lost their jobs and the prospects of finding a new one look bleak."
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