Are trade war sides looking for an opportunity to ally to hit China first and comeback and finish one another? How a harsh decision becomes so soft that remains untouchable in a hot summer where farmers prepare to start cultivation for coming autumn? Here we, the ICDST, explain how the tariff war might go to its hidden phases with much more devastation and incurable long term effects. Read more with us!

The United States and the European Union want to move towards “zero customs tariff” in non-automotive industrial trade, announced US President Donald Trump after a meeting with the President of the European Commission, Jean-Claude Juncker. This withdrawal happened few days after U.S. dollar sinking proving this fact that US is not able to be in a long term trade war.

Donald Trump and European Chief Executive Jean-Claude Juncker strove on Wednesday to defuse the crisis created by tariffs imposed by Washington, announcing a series of decisions in agriculture, industry and energy whose scope exact remains to be confirmed. After a two-hour meeting, the two leaders spoke in front of the press in the gardens of the White House.

“Zero tariffs” in their industrial exchanges, with the exception of the automotive sector
Speaking of a “big day” for free trade and evoking a “new phase” in relations between the United States and the European Union, the US president stressed their common will to move towards “zero tariffs” “in their industrial exchanges. the exception of the automotive sector.

He also assured that the EU would begin “almost immediately” to buy “a lot of soybeans” from US producers, and promised to revisit the issue of US tariffs on steel and aluminum, which had fired with powders.

According to a European source, no new customs tariff will be imposed on imports of European cars into the United States, a particularly sensitive issue for Germany, where this key sector employs some 800,000 people.

Our Analysis

Here at ICDST, we predict that the new confrontation goes to a hidden phase where parties will hit by means of certain import restrictions and by finding alternative partners in their trades. The new hidden trade war is even more dangerous as the decisions made or the steps taken are somehow unknown to other parties and finding the right measures will be more difficult. It seems that in near future there will be many invisible diplomatic connections between EU and China for countering US. However, China will be a main loser if it doesn’t attack first as the best defense is attack now that the future of EU/US China relations is unknown.

Since the crisis of 2007-2008, and under the very strong pressure of the regulators and the markets, the banking groups of the planet have on average doubled their maturities of capital: as many dampers intended to absorb possible economic shocks and not not live a new financial trauma. However, according to a recent study by Oxford Economics, this success in regulation is only partial. An example of this is the current rising numbers in US or falling in Italy, which are both sides of coin of the economical shocks.

A more crude indicator
The “solvency ratio”, the usual criterion used to verify that a bank is sufficiently capitalized is ” rather unpredictable ” to anticipate a bank failure. Firstly because this ratio allows banks to modulate the amount of equity depending on the type of asset present on their balance sheet: this gives “play” to banks, say the authors of the study. More in the American tradition, the latter prefer a more crude indicator, but less easy to handle: the leverage ratio (which measures the capital of the bank compared to the total assets of the bank, regardless of their level of risk, Editor’s note ). The image becomes less flattering since some banks only hold 3 or 4 dollars of capital for 100 euros of assets (against 12 to 18 dollars for the solvency ratio). Above all, the study recalls, the strengthening of bank balance sheets is partly illusory because it “coincided in some countries with a rapid rise in bad debts” .

Non-banking finance
In a more traditional way the study underlines that the banking regulation pushed to the development of the shadow banking, a sector of the finance which is not dangerous as such, but that the financial gendarmes seek to understand better and map. In particular “the connections between non-bank finance and banks” may be likely to spread a non-banking crisis towards traditional finance.