Balance or protectionism?

Oil prices (WTI) decreased by 4.3 percent to about $ 69 per barrel last Thursday, although imports of oil, gas and refined products are not directly covered in new US customs. The fall is not the result of a direct measure, but a broader sense of uncertainty, as investors expect that the tightening of trade disputes – with a ten percent basic customs duties and additional 34 percent for China and 20 percent for the EU, could declare global economic growth and thus demand for energy.

The euro jumped over $ 1.10, representing more than 1.6 % day jump (at the time of writing), as the markets in response to customs detects a wider impairment of the dollar and the growth of geopolitical tension. The EU has already announced countermeasures, while investors expect the ECB to reduce the interest rate by 25 base points in April, with the deposit rate dropping to 1.82 percent by the end of the year.

The return on 10 -year US bonds, meanwhile, fell to 4.08 percent, the lowest after mid -October, as investors found safer shelters in uncertain environment. US customs duties are particularly focused on countries with trade surpluses – China (34 percent), EU (20 percent), Japanese (24 percent) – which has strengthened the fear of recession. As a result, the markets are now expecting Fed four interest rates in 2025, the first to happen in June.

When announcing a new wave of US Customs Customs President Donald Trump – so -called « reciprocal customs », which extends up to 49 percent and in some places even higher – the world has divided into those who see the efforts for honesty in measures and those who point to the risks of new trade war.

Stable world order was a priority

For many decades, the United States allowed other countries to charge higher customs duties on US products, because at times when other partners were economically and technologically weaker, cheap imports and stable world order were appropriate. At many key turning points, the US played an active and often decisive role. Since the post -war renovation of Europe through Marshall plan, until the involvement of China into global trade architecture in the 1990s, the United States has in a fundamental sense, which was also favorable for weaker partners.

Today, when these once weak players have recovered economically and technologically, it is understandable that the US wants to restore balance, even if their rhetoric works sharply. The key is that finding balance does not slip into an open conflict.

The question, therefore, is whether customs duties are good or bad in themselves, but or as part of a wider process contribute to the formation of a more fair and balanced global trade system. If they are designed as a tool for negotiation and help to establish a new balance, they can strengthen the stability of the system in the long run. However, if they are based solely on defensive response to competition and lead to protectionism, distort market signals, reduce overall economic efficiency and guide away from optimum, both in terms of efficiency and justice.

Many exceptions

Given that the direct influences of US customs duties on the Ljubljana Stock Exchange are very limited for the time being, and negotiations have not yet been completed and include numerous exceptions, no major effects on the business of most domestic stock companies are currently not detected. The key shares on the Ljubljana Stock Exchange remain stable. Businesses operate successfully and profitable, and their values ​​have become even more attractive. We are expecting to grow dividend payments again this year, which further increases the interest of investors.

Slovenia, Ljubljana, 27.9.2017. Lojze Kozole, Illyria. (Author: Suhadolnik Jože) Photo Jože Suhadolnik Suhadolnik Jože

Of course, there can be some problems in supply chains, higher and lower costs of some Inputs. The central shares at LJSE remain stable. If the situation does not tighten significantly, in the short term, the prices of energy could even decline, thereby rising margins in the higher members of the value added chain, which would further support protectionist measures. Talking about a greater recession in the US or globally is much premature, more likely over time, stagnation, especially in the United States, where the consumer is already under pressure. But since more than half of the Americans have voted this policy, it is possible that, due to current events, sentiment is not paradoxically impaired.