Well, that escalated quickly. Looks like Donald Trump wants to take on the world with his tariffs. First there was the steel and aluminium tariffs that impacted Canada, Mexico and the EU. Then there was the tariffs on $50 billion worth of goods aimed at China specifically. Now with China threatening to retaliate, The Donald is now threatening tariffs on $200 billion worth of goods.
Of course, China has responded by saying that they're ready to hit back and that a trade war will hurt the people of both countries.
The only ones who win in a recession are those who have enough spare cash to buy when prices crash. Maybe that's the real intention of Trump and his advisors because the National Security / intellectual property angle doesn't make any sense. Why not just stop selling high tech equipment to China instead of tariffs?
Anyway, this talk of a trade war comes at a pretty bad time with rising interest rates and high levels of indebtedness. Could turn nasty quickly.
So the natural reaction when there's any bad news related to China is to see a sell-off in the AUD and NZD. But in this case, if China resorts to retaliatory tariffs on American products, then Australia and New Zealand could benefit by picking up the demand.
Of course, if the China debt bomb that everyone has been worrying about for the last twenty years or so decides to go off, then both currencies would see a major drop in their value. In a rational world, i'd say there's a low probability of that happening, but in bizarro Trump world, anything's possible.
