ATFX Forex market update: July 5, 2018


forex market update

The following guest post is courtesy of Ramy Abouzaid, Head of Research at ATFX, UAE.

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  • US-EU Auto Tariffs: A Closer Look
  • Global Economic Indicators
  • This Week’s Economic Calendar

Under the radar: Trump directs his weapon towards European auto makers

Ramy Abouzaid ATFX
Ramy Abouzaid, ATFX

US President Donald Trump told reporters on an Air Force plane on Friday that his government’s investigation into tariff increases for cars from the European Union and other trading partners would be completed within three to four weeks, according to Reuters.

Strangely, in recent US administration decisions on protectionist measures that could trigger a real trade war, these measures come at a rapid pace and on more than one front. According to Reuters reporter Jeff Mason, US President Donald Trump Speaking to reporters aboard Air Force One as he traveled from Washington to New Jersey said on Friday his administration’s investigation into whether to increase tariffs on cars from the European Union and other trading partners would be completed in three to four weeks. Trump also said the United States has been treated very badly by the World Trade Organization, but he is not considering withdrawing from it at this point. Asked when the probe would be concluded, he said: “Very soon. It’ll be done in three, four weeks.”

Trump ordered the “Section 232” national security probe into autos on May 23, and his unusually fast timeline calls for it to be possibly completed in just over two months. Similar national security probes ordered last year that led to import tariffs of 25 percent steel and 10 percent on aluminum, took about 10 months to complete. By law, the Commerce Department has 270 days to offer recommendations to the president after a Section 232 probe starts. The president then has 90 days to act upon those recommendations. Written comments from interested parties in the autos probe were due on Friday, and the administration has scheduled a public hearing for July 19-20.

The European Union has warned the United States that imposing import tariffs on cars and car parts would harm its own automotive industry and likely lead to counter-measures by its trading partners on $294 billion of U.S. exports.

In a 10-page letter sent by the European Commission to the US Department of Commerce last Friday, The European Commission tried to clarify the following key massages:

  • EU car makers made approx. 2.9 million cars in the United States, which is supporting 120,000 jobs – or 420,000 if auto dealers and parts dealers were included.
  • The bloc exported 37.4 billion euros ($43.6 billion) of cars to the United States in 2017.
  • 6.2 billion euros was imported to EU countries from USA.
  • In some goods, such as trucks, US import duties are higher.
  • The report said tariffs on cars and auto parts could undermine US car production by imposing higher costs on American manufacturers.
  • The EU has calculated that the 25 per cent tariff would have an initial impact of $ 13-14 billion on US GDP without any improvement in the current account balance.
  • Assuming countermeasures such as those taken in response to current US steel and aluminum import tariffs, up to $294 billion of US exports – 19 percent of total US exports – could be affected.

USA / Euro Area / United Kingdom / Japan

Economic Calendar:

Economic Calender Jul5

(1) Data sources & references:

• Thomson Reuters Eikon.

• Investing.com

• TradingEconomics.com

• forexfactory.com

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ATFX Forex market update: July 5, 2018

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