Putting pressure on China has backfired: Peter Cardillo, Spartan Capital

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Putting pressure on China has backfired: Peter Cardillo, Spartan Capital

Prolonged trade war to lead to global economic slowdown, says Cardillo.

If the trade war continues for a prolonged period, we could be headed for some serious economic slowdown and certainly a global economic slowdown, said Peter Cardillo, Chief market economist, Spartan Capital Securities, in an interview with ETNOW.

Edited excerpts:

There is no concrete decision on the US-China trade war front. US has gone ahead and hiked the tariffs. China is yet to take counter-measure. Where do you see this leading to now?

The market is going to respond in a very negative way in the sense that we very much react to headline news and there appears to be a contradiction within the administration. Trump continues to say one thing and, of course, the facts seem to be something else. As a result, the market is going to be very nervous.

Over the past several weeks, the market has been very nervous with big swings. This is going to continue. A trade war is very hard to win. Trump has been saying that it is an easy win. Obviously, he is now beginning to realise that is it is not an easy win and that the burden of this trade war is really going to fall on the American consumers. If the trade war continues for a prolonged period, we could be headed for some serious economic slowdown and certainly a global economic slowdown.

What should the Street make of this dichotomy in Trump’s commentary at this point in time? While he is imposing tariffs from 10% to 25% in a fresh round of imposition, why is he now saying that he is still optimistic US-China trade talks will continue?
That is the paradox. On a daily basis, Trump continues to contradict himself and it is very confusing. In reality, we are beginning to see the negative effects of the trade war. It is just the question of his style and his way of governing, but certainly it is a very confusing one and it can lead to some serious economic malaise if the trade war expands.

We had some comments from Larry Kudlow of National Economic Council, who said both the sides will continue to pay as opposed to Trump’s tweet that China will be paying for it, because it actually puts disproportionate amount of pressure on America’s other trading partners given how the situation is panning out between China and US?

Yes and the next round of negotiations is probably going to be with the Europeans and, of course, the administration has been very clear that there is a possibility that we are going to see tariffs put on steel makers in Europe. Again, that would be a widening of the trade war. Of course, I suspect that the administration is trying to put pressure so that they can avoid it but it is basically backfiring. It certainly backfired with China.

According to the administration, the Chinese backed away from the deal and so the hard line position taken by the administration may not get the best outcome. After a prolonged trade war, we could get some sort of trade agreement with China. Certainly it will be a bumpy road but we will get something and it is pretty much in the near future because elections are coming up in less than two years.

Source: https://economictimes.indiatimes.com/markets/expert-view/putting-pressure-on-china-has-backfired-peter-cardillo-spartan-capital/articleshow/69301826.cms