Running out of time
Markets are likely to shift their focus back to the conflict in Ukraine caused by the Russian invasion. Ending the conflict between these two nations had been one of Trump’s election pledges and one which he scorned his predecessor for allowing to take place. With seemingly no progress made towards a truce in this conflict, the President recently brought forward his deadline for a ceasefire. That deadline is set for tomorrow and shows little to no sign of being met. What is being questioned now is what will be Trump’s next move in order to achieve this truce which he has claimed would be so simple to obtain.
For the past few weeks, Trump has been using secondary tariffs in order to create economic leverage upon Russia’s key trading partners to starve the aggressing nation of foreign income. So far, with the exception of perhaps Switzerland who has responded to deterioration in trading terms by holding talks in the White House, such measures look to have been brushed off. The idea of such tariffs is to penalise a nation’s terms of trade with the USA should they continue to trade with Russia, particularly with respect to the exchange natural resources. In so doing the aim is that such nations cut ties with Russia in favour of maintaining less punitive trading terms with the US.
Such measures may prove to ultimately be ineffective to undermine Russia’s ability to justify and finance its invasion into Ukraine. To some nations trading with Russia, US trade cannot be considered a substitute to its economic relationship with Russia making secondary tariffs all but irrelevant. The risk to the EU as well as Ukraine is that the President considers his role in resolving this conflict completed and resides to allow Putin to continue. Having made steady advances into Ukraine so far this year, there is little chance currently that this war would end on its own. Commodity markets and FX markets also will be watching closely to see what POTUS’ next moves will be.
Discussion and Analysis by Charles Porter
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