Tariffs could hurt business, growth and earnings: Peter Cardillo

Synopsis

The administration's back-and-forth stance on tariffs is unsettling global markets, especially emerging ones. Tariffs could be inflationary, potentially harming business growth and future earnings. The dollar's weakness may also contribute to imported inflation. Until clear policies are in place, market uncertainty is expected to persist, affecting economic growth worldwide.

"The situation here is very tense in the sense that the administration continues to go back and forth on tariffs and so there is no clear vision of what is really happening," says Peter Cardillo, Spartan Capital Securities.

For emerging markets, is it too late to get bearish and for US market, is it too early to get bullish? Can I put it this way?
Peter Cardillo: Well, the tariff situation is impacting the global markets and if this continues here in the States, then it is safe to say that the global markets, especially the emerging markets, will continue to act accordingly.

And so, the situation here is very tense in the sense that the administration continues to go back and forth on tariffs and so there is no clear vision of what is really happening.

For instance, yesterday, Mr Trump announced that he would postpone tariffs on aluminium and steel, that is, on aluminium and Canadian steel and that was after the prime minister of Ontario, Ford, who postponed raising electric surcharges and so, we are seeing this tug of war.

Hopefully, at one point, there might be some negotiations and we will have a clearer picture, but until then, the markets are going to stay rather unsettled.

What will settle the market then because this entire rollout, rollback, rollback, rollout, it is just going to make markets nervous. It will make corporates nervous. It will make the trade watchers nervous. I mean, what does one do in this kind of a world when the US president himself does not know what is coming next?
Peter Cardillo: I think it is important to realise that even though the Trump administration is saying that tariffs will boost the economy, if you realise the impacts of tariffs, they will be inflationary. They will probably cut into business and so that means lower growth and that means lower earnings in the future. So, in my opinion, it will be negative in terms of slower growth and in terms of slow earnings and that will impact right across the globe. The same situation prevails. I mean, if you have a trade war, each country is going to feel the effects of perhaps a higher inflation and slow economic growth.

The other thing is about the dollar move. Is it a fair assumption to say the dollar may have peaked out in the near term because that has a bearing on the way the emerging market flows as well move.
Peter Cardillo: Yes, well the dollar has been weak due to the tariff situation. And if you measure it by the dollar index, we are probably going to go a little bit lower. There is a good chance that we could see 102 on the dollar index and certainly that is a hefty drop from just about four or five weeks ago when we were trading between that 107 and 108 level, so that is going to be another problem in the sense that any country that has a strong currency that helps contain inflation and certainly here in the States and so the lower the dollar goes, the chances of imported inflation heating up is greater.

...moreless

...moreless