G20: Fair and free trade to be the theme - BBH

This week concludes with the G20 meeting in Hamburg Germany on July 7-8 and the theme is fair and free trade, according to analysts at BBH.  

Key Quotes

“It will be one of the more difficult summits to paper over the distinct tensions as is the usual fare. There are broad tensions with the United States.  The withdrawal from the TPP and the Paris Accords, the sanctions that threaten the Nord Stream 2 pipeline, the reported requests for unilateral concessions from some Asian trading partners, supporting Le Pen in France, and the threat to put a tariff on steel imports are all flash points.”

“The inability to distinguish a squabble among friends and allies with strategic disputes with adversaries risks raising trade tensions and isolating America at a time when international cooperation is sought on a wide range of issues, including fighting terrorism and reining in North Korea.  This could have a longer-term impact on the dollar, and underpin the underlying desire for an alternative, for which we would continue to argue that there is no compelling candidate.”

“However, the key to the dollar's performance in the time frame that matters to most investors lies with cyclical considerations and the US economic and monetary policy.  The debate within the Republican Party, which has a majority in both chambers, has paralyzed the legislative process, creating the famed gridlock, in a similar but different way that as the inter-party rivalry has sometimes fostered. The lack of convincing legislative progress on healthcare, for which the opposition to the Affordable Care Act was most united, raises questions about the broader economic agenda, and recently prompted the IMF to revise down its growth outlook for the US.”