The President Trump news cycle just keeps going.
This time he is threatening to withdraw the United States of America from the World Trade Organisation (WTO), saying that it treats the USA unfairly. He said to Bloomberg "If they don't shape up, I would withdraw from the WTO".
According to Forbes, the US wins around 90% of cases it brings, but loses approximately 90% when it is complained against.
One President Trump's key election talking points was accusing almost every ally (and enemy) of taking advantage of the United States in trade. Some of what he says is justified, but a lot of it isn't, particularly when you consider the negative flow-on effects to certain American businesses his actions are creating.
If the US wasn't a part of the WTO then it would be ignoring a lot of the rules for international trade.
President Trump has also sought to implement tariffs on a further US$200 billion of Chinese goods according to Bloomberg. A public-comment period concludes next week.
As you have seen, everything that he has done so far has not actually had any real consequences for the global share market or the global economy. There is a danger that it could have a negative effect – but who knows if, or when, that breaking point would be?
You would hope that one or both sides of these potential trade wars come to the table before it's too late.
A lot of our businesses are domestic focused and therefore aren't affected by trade wars – such as Telstra Corporation Ltd (ASX: TLS), Wesfarmers Ltd (ASX: WES) and many smaller businesses. Banks like Commonwealth Bank of Australia (ASX: CBA) are somewhat more linked to the global economy.
However, just because the earnings aren't linked doesn't mean the share prices won't be affected. Investors have a knack for becoming quickly and irrationally scared.
