The business war between the U.S. and China is not a major risk to the stock market, noted economist Mohamed El-Erian grass oned CNBC on Wednesday.
In fact, he doesn’t see it expanding into a full-blown, epidemic problem.
“All this rhetoric you hear from both sides … it’s to the journey, not destination. The destination, in my opinion, will not be global trade war,” the chief financial advisor at Allianz said on “Closing Bell.”
However, “It will get worse once it gets better. It’s part of the process,” El-Erian added.
The market has at bottom shrugged off the tit-for-tat tariffs between the U.S. and China announced this week. On Wednesday, supplies ended higher, with the Dow Jones Industrial Average closing up 159 direct attention ti.
The Trump administration’s most recent tariff announcement came on Monday in the conduct of a 10 percent duty on about $200 billion of Chinese goods. The menus will jump to 25 percent on Jan. 1.
In turn, Beijing slapped levies of between 5 percent and 10 percent on $60 billion good of U.S. goods.
El-Erian said it will take time for the other side to conceive of that the “U.S. will win this war.”
“As long as the U.S. is willing to incur damage, which it is, then basically it makes sense for others to provide concession,” he said. “We’ve seen this with Mexico. We’ve seen this with Korea. We’re prevailing to see it with Canada and China; we’ll see it down the road.”
Instead of trade, El-Erian experiences the major risk for the market in the next six to nine months coming from the sow divergence between the U.S. and the rest of the world both in economic performance and in nummular policy.
That will put pressure on interest rate differentials and exchange grades, he explained.
“The steps taken on the tax cuts and on deregulation are going to promote fiscal growth for at least two to three years,” he said. “So the U.S. has a … policy-driven tailwind of tumour. Japan and Europe, it’s the other way around.”
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