A LOOMING trade war between Donald Trump’s America and China has sparked new panic on financial markets and raised fears of global recession.

There was a volatile day for stocks in New York as investors turned to the safe havens of gold and bonds amid talk that Germany, Europe’s economic engine, could slip into negative territory.

Veteran analyst David Buik warned theUK would today likely post flat growth – or even a 0.1% decline in second quarter Gross Domestic Product figures.

Mr Buik, writing in The Herald, said: “With the EU conceivably staring over the precipice of recession, this data could set the alarm bells ringing.”

Mr Trump this week hinted he was bracing for a long drawn-out dispute with China, which has warned its own economy will grow at the lowest rate for a decade.

China stepped up its own rhetoric earlier this week, saying America was “deliberately destroying international order” through “unilateralism and protectionism”.

The United States responded by saying China was effectively cheating in trade by devaluing its currency, a familiar refrain by Mr Trump.

Steven Mnuchin, his treasury secretary, said cutting the value of the yuan was designed to “gain unfair competitive advantage in international trade”. 

The US will now ask the International Monetary Fund to “eliminate the unfair competitive advantage created by China’s latest actions”.

The devaluation came after Mr Trump reignited tensions by saying he would refresh tariffs in September. A weaker yuan makes Chinese exports cheaper for foreign buyers, which Mr Trump claims allows China to undercut US manufacturers.

Traders have been nervous ever since shares in America recovered some of their losses but remained volatile. Traders have been nervous ever since.

People’s Bank of China officials denied any deliberate manipulation of their currency.

Mr Buik, meanwhile, warned there was unlikely to be any resolution of the trade dispute before Mr Trump faces re-election next year.

He told BBC Radio Scotland that Mr Trump “was very, very dangerous” and “could move mountains.”
Mr Buik added: “This will run and run and run.

“The problem is it has  a domino effect on the marketplace when you have growth falling all over the place. 

“At the end of this week we are likely to see the UK as a result of Brexit and other things dip and with the European Union not that far off.”

Germany has caused the most concern for a possible recession after posting results showing a drop in industrial production and Dutch giant Rabobank said it was projecting a mild global economic dip in output due to the trade war’s effect on markets and confidence. 

There was better news for Scotland, albeit in arrears. As the UK  prepared to post second quarter GDP figures, Scotland’s revised first quarter figures showed better performance than Britain as a whole.

The Scottish Government said GDP rose 0.6 per cent in January-March of 2019, compared to 0.5% in the UK. Scotland will have to wait till the middle of next month for a first measure of how its economy fared April to June.

Meanwhile, house prices in Scotland continued to grow in July and industry experts expect the trend to continue, according to new figures.

The monthly RICS Residential Market Survey showed 72% more respondents expect house prices to rise for the next 12 months. 

President wields massive power over markets on Twitter

I USED to think Fed Chairman Alan Greenspan and Salomon Bros Guru Henry Kaufman in the 80s and 90s were the most influential market manipulators during my 50 years in the City of London.

Frankly they don’t “hold a candle” to President Donald J Trump, whose use of his Twitter account makes most traders either quake in their boots or try their patience to the limit, such is the power he wields with his index finger.

President Trump has been enjoying a battle royal with the Chinese authorities over trade imbalances for months. He also has been having a robust battle with FED chairman Jay Powell, niggling him to cut rates.

These skirmishes have been boiling up for a month and unfortunately the President has run out of patience on both fronts. 

He expressed his disappointment at the parsimonious 25 basis point cut in the FED rate last week, in the wake that growth in the US had dropped from 3.1% in the first quarter to 2.1% in the second. This is in line with what is happening around the world. The President has an election to win next year and no one has ever won against a background of a trashed stock market.

Last Friday he threatened a further 10% tariff on another $300 billion of Chinese imports. With the UK likely to post a flat second quarter growth tomorrow – possibly a -0.1%, and with the EU conceivably staring over the precipice of recession, this data could set the alarm bells ringing. Add to that China’s lowest GDP estimate in a decade of 6.2% and this economic cocktail becomes even more foreboding. 

If President Trump solves the trade spat, with the FED encouraged to cut rates by 25 more basis points, the climate could change in a heartbeat. Don’t hold your breath. 
 
David Buik is a veteran markets analyst and has worked in the City for more than 50 years.