Raw material & Currency roller coaster

Prices of currencies and raw materials are moving as an amusement death trail in the recent period, and the shocks are sudden.

The trade clash between the United States and China is rising. Following last year's opening of customs duties on steel and aluminum, the US administration has adopted a plan to introduce a 25% customs duty rate on 1,333 Chinese imported products - last year the value of imports of these products reached about $ 50 billion - as a penalty for what they consider to be theft of intellectual property. China returned the attack with a plan to introduce 25% customs duties on a whole range of US goods, also worth around $ 50 billion. In response to this act, which he described as 'unfair repayment', US President Donald Trump said he was considering another tariff package on another US $ 100 billion worth of imports from China.

source:learntotradethemarket

All this is a game, that can help us determine whether the present exchange of customs will ultimately reach such a strategic point that will either lead to a more 'cooperative game' (free and fairer trade) or it will develop into a wider 'non-cooperative game' (open trade war)

source:giphy

The rapid expansion of trade in recent decades has created a cross-border interdependence between production and consumption. Today's supply chains can have as many important international as well as domestic members, with a considerable proportion of internal demand being products that are partly or entirely produced abroad. As technological innovations additionally eliminate barriers for manufacturers and consumers, these links are even more easily expanded and flow into an extremely intertwined set of cross-border relationships and addictions.

A condition for the long-term success of individual participants and the whole system are effective mutual relations based on cooperation, where all involved are considered to be credible. Otherwise, they all risk a lower rate of economic growth and prosperity. It is precisely for this reason that the current confrontation between the United States and China is arousing fear of a serious damage, especially if it will lead to rising protectionism and a wider 'trade war'.

International economic relations

The first assumption was that the benefits from trading would be shared between the majority of the population, either directly or in fast-growing economies through appropriate redistribution policies. The second assumption was that the most important actors in world trade - including the developing economies that joined this process, and later fundamental institutions such as the World Trade Organization - would sooner or later adopt the fundamental principles of reciprocity, while also reducing customs and non-tariff barriers.

Since these assumptions turned out to be overly optimistic, counterfeit policies have begun to lose importance as well as sustainability. The consequences are mirrored in the pronounced strengthening of nationalist populism. It is a trend that has led to new trade restrictions, to re-negotiating existing agreements (such as the North American Free Trade Agreement), and to resistance to supranational institutions (United Kingdom voting to leave the European Union).

Current trade tensions can transform this co-operative game into a non-cooperative game with elements of 'prison dilemma' in which each act for its own benefit turns out to be disastrous for both the individual and the whole group. Given that in this case the loss would be inevitable for most countries, what is the real goal of the trade war?

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