What a Trade War Could Mean
for Global Markets

The dissonance over trade between the United States and major trading partners – including the European Union, China and NAFTA partners: Canada and Mexico – has rippled through various asset classes and created a sense of uncertainty.

As investors mull over possible longer-term ramifications of the declared tariffs and retaliatory measures, the CME Group offers liquid and cost-efficient futures and options across the major asset classes to protect your investment portfolio.

Scroll to see how the trade war is unfolding.

How Might the Trade War Impact Global Markets?

 

The tariffs and retaliatory measures leading up to this trade war may have a strong impact on products the U.S. trades with affected countries. While metals and agricultural markets respond to the trade war, keep track of liquidity in the markets you care about with the CME Liquidity Tool.

Now available: the CME Liquidity Tool provides current and historical bid-ask spreads, book depth measures and cost to trade statistics for CME Group products through interactive visualizations.

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Latest Trade War Developments

U.S. Hog futures are tumbling as a result of the tariffs on U.S. pork imports in Mexico and Canada.

Impacts to Major Global Markets

Soybeans

  • Soybeans likely to be one of the most impacted products
  • U.S. exports 17% of global soybean production yearly
  • China imports 1/3 of soybeans from the U.S. and will likely turn to Brazil to supplement

Corn and Wheat

  • Less likely to be impacted by trade skirmishes
  • U.S. corn exports to Mexico equal only about 3% of global production
  • The U.S. is not a major exporter of corn or wheat to China

Oil

  • Influences on Brent-WTI spread: China’s actions, lower production from Libya and Iran could narrow spread, higher production from OPEC and Russia could widen spread
  • Signs of slower growth in China – meaning less oil demand
  • China may curtail purchases of U.S. shale oil
  • Most of the next leg of U.S. shale oil production increases coming in 2019

Equity, Treasury, and Bond Reactions

  • Equities may see significant volatility and little upside until trade tensions ease
  • Flight-to-quality in U.S. Treasuries
  • 10-year Treasury yields likely to stay under 3% until tensions ease
  • Relief rally in Equities and sell-off in Treasuries likely if tensions ease unexpectedly

What Does This Mean?

 

The U.S. will likely see selective retaliation from countries affected by the tariffs and trade restrictions.

  • Canada, China, EU and Mexico likely to target politically-sensitive products
  • The direction of the various trade disputes remains highly unpredictable, but will probably not cause a recession
  • Company investment plans could be delayed until dust settles
  • Trade war may exacerbate slowdown in China, disrupt global supply chains