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Commodity BulletinTrump against the world

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Trump against Europe undermines diplomacy
President Trump’s negotiating strategy (pursuing many high-stakes negotiations with little possibility of winning them all) may have been a recipe for success in business, but running US foreign policy with the same methods has disrupted the world order as we have known it since WWII. Europe’s leaders appear to have decided they can no longer rely on the US for a helping hand and are now trying to fight fire with fire.

Trump against China fuels commodities inflation
The trade war with China has shifted back and forth but has now entered a phase with a clear strategy. The “shot in Sarajevo” will be fired on July 6 when tariffs are imposed, which does not leave much time for a breakthrough. The US has its sights on China’s ambitions of climbing the value chain, while China is aiming at US commodities exports. With tariffs on everything from soybeans and beef to cars, there will be inflation on both commodities and consumer goods.

Trump against Iran fuels the price of oil
After 18 months of production cuts, OPEC changed tack during the year’s first meeting in Vienna. The expanded group, OPEC+, is returning to its target of 1.8 Mbpd. In practice, this means that the strong countries will have to increase production and compensate for the weak countries involuntarily having to cut more than the agreed production. Saudi Arabia has therefore prepared
the way for it to be able to capture Iran’s market share when US sanctions are re-imposed in November. The oil price rose on the details of when OPEC’s reserve capacity will decline further.

Trump against NAFTA fuels agricultural goods
Trump’s tough rhetoric against the US’s neighbours and his scorn for Canada after the G7 meeting have the potential to lead to NAFTA’s demise, and countermoves from Mexico and Canada in the form of soy and corn tariffs, would lay the foundation for food price inflation.

Disclaimer

Martin Jansson

Strategist

Commodities

nija03@handelsbanken.se

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