Trump’s trade war will need a circuit breaker

June was a challenging month as markets were buffeted by trade war tensions. Early in the month, President Trump imposed steel and aluminium tariffs on Europe, Canada and Mexico, prompting each country to retaliate with tariffs on US products. The Trump administration also announced a $US34bn list of Chinese goods that will be subject to tariffs beginning July 6.

Diverging economic trends saw a widening gap between global central banks, with the US Federal Reserve signalling more aggression in its policy tightening, and while the European Central Bank indicated it will end its bond purchases in December, it made clear interest rates will remain at their present level until at least the middle of 2019, if not longer. The June quarter also saw Italian politics cause volatility in bond markets as anti-establishment parties formed a government.

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