“In relative terms, we are winning and we will win the trade war,” said Mohamed El-Erian, chief economic adviser at Allianz, on Monday. El-Erian is thought by many market participants to be one of the world’s most powerful financial market thinkers.
“Just look at the performance of U.S. markets relative to China and relative to others,” said El Erian, former CEO of Pimco.
US President Donald Trump first proposed tariffs in March, as an attempt to correct what he considered unfair trade practices. Last week, the US administration imposed a $34 billion charge on Chinese goods. Beijing responded immediately with its own tariff, and accused the United States of launching the “largest trade war in economic history”.
Meanwhile, investors all around the world have stayed tense amid these trade tensions, with fears of a trade war between the two largest economies in the world. All three key indicators closed on Monday, prompting some to conclude that trade concerns are on the decline.
“The tit for tat continues, but ultimately it doesn’t lead to a full-blown trade war,” El Erian declared. “When people realize that at the end of the day, the U.S. will prevail, because [China] is a less open economy, because [the U.S.] is a more dynamic economy, that ultimately you may end up in a situation where the U.S.’ position in global economic terms is better off,”. The economic adviser also stated that the situation in the global economic situation is better now.
However, there are some fears that Trump’s unconventional negotiating tactics have gone too far. El Erian declared that as long as the risks are managed, “One of the upside risks, is that you may end up changing the global landscape in a way that favors the U.S. Because countries will realize, if we slip into a trade war, while everybody suffers, [the] U.S. does better in relative terms,” he said. Pimco’s ex CEO concluded that the US economy is more solid than the rest of the world.
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