For decades, even before becoming a politician, Donald Trump talked about trade and the ways other countries were treating the United States. He argued that countries like Japan, South Korea, and China were taking advantage of the country. He also argued that European countries formed the European Union to match the strength of the United States.
During the campaign, he derided the three countries and the EU. At some point, he threatened to force Japan and South Korea to pay for the protection the US provides. He also vowed to get out of large multilateral agreements like NAFTA and TPP.
In the first year as president, Trump surrounded himself with people who shared a different opinion. His Chief Economic Advisor, Gary Cohn was a globalist, while his Chief Security Advisor, McMaster was very different than the president.
This month, he changed his strategy and started following his inner feelings. He implemented more than $60 billion in Chinese tariffs and started a 10-25% tariffs on steel and aluminum. He brought a new Security Advisor who believes that only a military strike will stop North Korea.
Over the weekend, traders focused on the increasing global tensions on trade. They wondered whether the world would start a trade war and the implications of such a thing. However, a silver lining came when Wall Street Journal reported that China and the United States were currently negotiating a trade deal to iron out the key issues between the two countries. The headline was accepted by the markets with the US futures trading higher. The futures of the Dow, which fell by 424 points on Friday, is now up by 106 points while the S&P 500 is up by 13 points.
Another focus during the weekend was on energy. Last week, crude oil rose significantly, fueled by the increased tensions in the Middle East. The appointment of Ambassador Bolton by President Trump raised the chances that the US will pull out of the Iran Nuclear deal. Before, Bolton has argued that the deal was a bad one, and one that will accelerate Iran to develop nuclear weapons. The former advisor, McMaster did not believe so. Therefore, there is a high likelihood that Trump will exit, which will increase tensions. Saudi Arabia promised to develop nuclear weapons if Iran started developing their own.
At the same time, China launched the yuan dominated oil futures. These futures give the world’s largest oil market a bigger say in determining the price of oil. In the first hour of trading, more than 12 million barrels of Shanghai’s September contracts changed hands. It opened at 440.4 Yuan ($69.78) per barrel and jumped to a high of 447.1 yuan ($70.85).
There was also focus on silver after an analysis by Wall Street Journal. The article showed that silver was losing momentum this year, trading at 82 times cheaper than gold. This is usually an indicator that the economy has some problems because of the industrial nature of silver. It is bought for its industrial uses unlike gold which is bought for its store of value characteristics.