Gold price sharply up on safe-haven demand as FOMC meeting begins

US President Donald Trump’s latest tariff war is far more intense than the first one, but it will not be an easy win for the administration as US dollar assets are under pressure like never before and capital markets volatility could force Washington's hand in softening its stance, economists say.

While the tariff war is among the leading threats, the even bigger risk is extreme policy uncertainty in Washington. It has forced nations to seek new alliances and has opened trade and investments avenues for neutral countries such as the UAE, economists told the third Capital Market Summit in Dubai on Tuesday.

“During the first round of the [Trump] administration, one politician said trade wars are beautiful and easy to win [but] this time around for the US administration, it's not going to be easy to win this war,” Sergei Guriev, Dean at London Business School, said.

“Sometimes you hear noises from the White House that they will punish countries trading with China, they will punish countries helping avoid tariffs, [but] I don't think they have capacity for that.”

The world remains in very unsettled state with continued mercurial policymaking. However, the volatility in capital markets is a bit of a silver lining, as it is something that has forced Washington to walk back on some of its hardest policy positions.

“My optimistic angle is this administration seems to be sensitive to markets when it sees that people who are friends with administrations are losing money, when they see that capital markets, bond markets are nervous, they sometimes walk back,” said Mr Guriev, who was chief economist at European Bank for Reconstruction and Development at the time of the first Trump presidency, told the delegates.

Mr Trump won the US election in 2024 on a promise of improving the economy, including reducing the cost of living, and impose stricter immigration policies. He followed through his campaign promise of imposing tariffs on US trade partners and allies, and levied historic duties that are threatening to disrupt global trade and break out of a full-blown tariff war with China, the world’s second-biggest economy.

He has put 145 per cent tariff rate on goods going to the US from China, while Beijing has responded with a 84 per cent tariff rate. He also levied stiff duties on partners across the EU bloc and other Asia economies that have clouded prospects for global economic growth.

The uncertainty stemming from Washington’s insistence on upping the stake in tariffs sent capital markets on a white knuckle ride from US benchmark index crashing from all time highs into correction in a short span of time, losing more than $6 trillion in the first two days of the so-called liberation day announcement in April. Bonds and other US-dollar denominated assets have also felt selling pressure, which forced the US administration to suspend the record-high tariffs for 90 days and levied 10 per cent broad-based duty while it negotiates individual trade deals.

Markets still remain jittery and headline-driven and analysts say a clear heading of US dollar assets will not be determined until trade-related uncertainty is removed.

“Where I'm worried, I think, we'll see a lot of dollar volatility because this is something which we've never seen before,” Mr Guriev said.

“During volatile periods, people would usually flock into safe assets [but] the US dollar this time around, nobody's sure how safe US dollar assets are … this is something to think about, when you're a financial investor that how you hedge the US vulnerability?”

While nations around the world have taken different approaches to deal with US tariffs, countries in the Middle East such as the UAE have maintained a “more patient engagement” as it underpins its focus on its geographic advantage in trade and is charting policies to match it, Rajeev Sibal, senior global economist at Morgan Stanley, said.

“The Cepa [deals] that the UAE is negotiating have really opened a pathway,” he said. “So, I think what's going to happen … you're going to see new trade channels being formed, and it's really going to be about recognising where the opportunity is, and if policy can help effectuate that change and here's the place that I think it is happening.”

The UAE, the Arab world’s second-largest economy and Dubai in particular has faced many similar cyclical headwinds in the past but the Emirates over the past five years has instituted structural changes that mean it is well-placed for growth despite external shocks, Simon Williams, chief economist CEEMEA, HSBC Middle East, said.

Mr William and Mr Guriev said and neutral countries should continue to trade with everybody and it's a good idea to attract investments from both east and west, and benefit from that.

“I think if we converge on the structure of tariffs that Trump administration seems to be happy about – 10 per cent on everybody, 60 per cent on China – neutral countries that want to trade with everybody, will be the destination for trade and investment,” Mr Guriev said.

“And, of course, Emirates and Dubai in particular are best positioned to be this hub for global trade and I think this is the way to go.”

Source: THENATIONALNEWS

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The European Union is under no pressure to accept an unfair tariff deal with the United States, its trade chief said on Tuesday, adding that it was being contacted by other countries seeking to forge closer trade ties with the 27-nation bloc.

The EU faces 25% US import tariffs on its steel, aluminium and cars and so-called "reciprocal" tariffs of 10% for almost all other goods, a levy that could rise to 20% after President Donald Trump's 90-day pause expires on July 8.

European trade commissioner Maros Sefcovic said the EU would use the pause to prepare further rebalancing measures and ensure a level playing field if talks failed.

"All options remain on the table here," he told the European Parliament.

While the EU's clear preference was to negotiate a solution with the United States, he said Washington now needed to show its readiness to make progress towards a fair and balanced agreement.

"We do not feel weak. We do not feel under undue pressure to accept a deal, which would not be fair for us," Sefcovic said.

The commissioner said US tariffs now covered 70% of EU goods trade to the United States and that could rise to 97% after further US investigations into pharmaceuticals, semiconductors and other products.

He said the EU was also focused on the 87% of global trade not conducted with the US, pointing to the bloc's negotiations with India, Indonesia, the Philippines, Thailand and Malaysia.

"I can tell you that our phones are not stopping ringing all the time because everyone wants to accelerate free trade agreement negotiations with us," he said.

The comment evoked language from the White House, which has said it has received a flood of calls from governments seeking to cut deals and reduce the impact of Trump's tariffs, which have roiled markets and raised fears of a global economic downturn.

The European Union has suspended its own countermeasures against the US steel tariffs to give room for negotiations, although they appear not to have made much progress.

Sefcovic said the EU would also guard against possible surges of imports due to trade diverted by Trump's tariff wall, adding that a task force set up to monitor trade diversion would produce its first results in mid-May.

Source: Theedgemarkets

Bitcoin eyed fresh month-to-date lows into the May 6 Wall Street open as “directionless” crypto markets contrasted with a gold rebound.

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

XAU/USD was up 1.5% on the day at the time of writing, with week-to-date gains already at 4.4%.

XAU/USD 1-hour chart. Source: Cointelegraph/TradingView

Bitcoin vs. gold comparison. Source: The Kobeissi Letter/X

“BTC is consolidating between last week’s high and low, awaiting tomorrow’s FOMC meeting and Jerome Powell’s speech. Meanwhile, the daily MACD is crossing bearish, signaling slowing momentum,” fellow trader Titan of Crypto summarized.

BTC/USDT 1-day chart with MACD data. Source: Titan of Crypto/X

BTC/USD 1-week chart with 21SMA. Source: Cointelegraph/TradingView

Source: Cointelegraph

U.S. Treasury Secretary Scott Bessent told CNBC on Monday that he expects to see progress in U.S.-China trade talks in the coming weeks, stating that President Donald Trump’s 145% tariffs on the country were not sustainable.

But Bessent did not comment on whether active trade talks with China were happening.

“I think we could see substantial progress in the coming weeks… 145%, 125% tariff levels are the equivalent of an embargo,” Bessent said in an interview with CNBC.

He also noted that the U.S. had the high ground in the trade conflict, stating that the U.S. was the “deficit country” and that China, the “surplus country,” had more to lose.

When questioned over whether negotiations were happening, Bessent said “we’ll see over the coming weeks, we’ll see what President Trump wants to accept.”

Bessent’s comments come amid heightened uncertainty over whether U.S.-China trade talks are taking place, after the two countries became embroiled in a bitter trade war in April. Trump slapped China with 145% tariffs, while China retaliated with 125% tariffs.

But while Trump claimed that Chinese trade talks were taking place, China denied that any negotiations had happened. Trump also signaled little intent to hold immediate talks with Chinese President Xi Jinping.

China did signal some openness to trade talks last week, claiming that U.S. officials had reached out with the intent to negotiate. But Beijing said it will not engage in talks until the U.S. brings down its steep tariffs on the country.

Trump has signaled that he is open to lowering tariffs on China, but will not do so until Beijing comes to the negotiation .

Trump claimed on Monday that China wanted to make a deal “very badly,” although he did not clarify whether Beijing had reached out.

Source: Investing

India and the UK agreed a trade deal aimed at boosting economic ties between the world’s fifth and sixth-largest economies, as Washington’s disruptive tariff policies continue to reshape global trade.

“The conclusion of a balanced, equitable and ambitious FTA, covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries,” the Indian government said in a statement Tuesday. “It will also unlock new potential for the two nations to jointly develop products and services for global markets.”

The deal is a critical one for UK Prime Minister Keir Starmer and his Indian counterpart Narendra Modi as countries globally race to insulate themselves from the fallout of US President Donald Trump’s tariff wars. For India, the deal burnishes its credentials as an emerging destination among investors looking to diversify away from China.

Source: Bloomberg Europe