Trump's tariff war shakes calm markets around the world

Trump's tariff war shakes calm markets around the world

Former US President Donald Trump's efforts to rebalance global trade have sent both Wall Street and US Treasury bonds into turmoil in recent days. Investors tend to buy gold during such times to hedge their assets. Particularly noteworthy is the development of the Taiwanese currency, which rose by around 8% against the US dollar in two trading days due to speculation that Taiwan has made trade concessions to the US government.

Amazing exchange rate movements in Taiwan

This new dynamic in the currency market is reinforced by the unexpected daily growth of the Taiwanese currency, which has not been seen in about four decades. According to Reuters, the increase was particularly surprising given that Taiwan's central bank typically maintains stability and calm in financial markets.

Impact of trade talks on the currency market

The fluctuations in Taiwan and Hong Kong show the far-reaching consequences of Trump's trade war. Yang Chin-long, the governor of Taiwan's central bank, was forced to hold a last-minute news conference to quell rumors about a Trump administration request to revalue Taiwan's currency. He warned that stock market commentators should refrain from making speculative statements so as not to jeopardize the stability of the foreign exchange market and the real economy.

Reactions from Taiwan's leadership

Taiwan's President Lai Ching-te also spoke out, describing reports of an exchange rate agreement with the US as "fake news". A stronger currency would make Taiwanese products more expensive compared to the US dollar and reduce export competitiveness.

Taiwan as a key player in global technology supply

Taiwan plays a central role in the global technology supply chain, particularly because of the Taiwan Semiconductor Manufacturing Company (TSMC), which produces more than 90% of the advanced microchips used in smartphones, artificial intelligence and weapons systems.

Consequences for the US economy

Sean Callow, a senior foreign exchange analyst at ITC Markets, describes the last few days as “surprising” for the Taiwan dollar. He argues that the US dollar's "increasingly damaged global reputation" should cause it to trend lower against most currencies. This would make U.S. products cheaper and more competitive abroad, consistent with Trump's strategy to restore U.S. industrial dominance.

Development in Hong Kong

In Hong Kong, the de facto central bank said Tuesday that it has spent 60.5 billion Hong Kong dollars (about $7.8 billion) to buy U.S. currency, a record amount, according to Bloomberg. The Hong Kong dollar remains pegged to the US dollar, an arrangement that has been in place for nearly four decades and is seen as a guarantee of financial stability and prosperity.

Developments in Taiwan and Hong Kong highlight tensions in global trade and their impact on currency stability in the region. The next steps in U.S.-Taiwan trade talks will be critical to ensuring economic stability.