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US Says Not Afraid of a Trade War at G20, Will Japanese Yen Gain?

US Says Not Afraid of a Trade War at G20, Will Japanese Yen Gain?

Daniel Dubrovsky, Strategist

Talking Points:

  • The G20 meeting concluded with US stating that it is not afraid of a trade war
  • Most countries want free trade, but call to action against protectionism absent
  • In the event of a trade war, the anti-risk Yen could benefit along with the USD

Have a question as to how the aftermath of the G20 meeting could impact anti-risk currencies like the Japanese Yen? Ask it live during a Trading Q&A!

Amidst a time when the US is planning on imposing $60 billion in tariffs on Chinese products as well as the ones targeted at steel and aluminum imports, the conclusion of this week’s G20 meeting finished without much call to action. Yesterday, participants made it heard clearly that they are strongly opposed to tariffs and accused the US of potentially igniting a trade war.

The final statement didn’t directly mention about a fight against protectionism. This is a step away from the language which was used to fight it before. Following the final communique, US Treasury Secretary Steven Mnuchin mentioned that “trade isn’t about protectionism” and that “we are not looking to have protectionism”. He reminded us that President Donald Trump made it clear that he wants free and fair trade.

Additional comments from US Treasury Secretary Steven Mnuchin:

  • Talks on trade, tariffs are ongoing. Had very direct talks with China
  • Talks on metal tariff exemptions are ongoing. US isn’t saying ‘my way or the highway’ on China
  • Haven’t seen progress we want from China on trade, need to be prepared to act in US interest on trade
  • We are not afraid of a trade war

Other countries also made it clear what their stance on trade is. Canada’s Finance Minister Bill Morneau said that there is a continuing consensus that open trade is important. The Governor of Bank of Italy, Ignazio Visco, said that they agree on trade wars being a negative-sum game. France’s Finance Minister Le Maire said that “unfair trade conditions are also at the root of our difficulties”.

Cryptocurrencies were another hot topic that was brought up from yesterday. There members said that they lack the traits of a sovereign currency. Well for the first time in history, participants pointed out the rising risks of them. This include tax evasion and money laundering. G20 members also agreed that they are going to refer to them as assets rather than currencies.

With the conclusion of the G20 meeting, the US emphasized that they are not afraid of a trade war. China also seems to be heading in that direction after it applied duties on methyl isobutyl ketone on countries such as Japan, South Korea and South Africa.

The markets responded negatively to that news and more of the same seems likely if a trade war eventually ensues. In the event of aggressive risk aversion, the anti-risk Japanese Yen could stand strong at the end of this. If things turn even worse for sentiment, the US Dollar could also benefit as the world’s most liquid asset and go-to safe haven.

Japanese Yen and US Dollar Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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