President Trump’s Putin Pivot
Trump’s Pivot on Putin is probably due to a sense of personnel betrayal. This is likely to make it more durable than if it was based on a moral policy vision. The pivot has the potential to change the battlefield in Ukraine and to significantly increase the risks to the already parlous Russian economy. In short Vlad has overplayed his hand.
This has links to other policy areas that matter to markets.
- First, it could significantly escalate the US trade war with India and China after 50 days.
- Second, this would increase the cost to China of being on Russia’s side.
- Third, it means the EU will try very hard to avoid a trade war with the US even if some sanctions (short of a generalised 30% tariff) are declared on August 1.
- Fourth, curtailing Indian & Chinese demand for Russian oil will increase demand for other crudes - like Brent.
- Economic uncertainty is likely to remain high, if below peak level. It is a material factor in causing low growth as it hampers both investment and consumption.