Central banks provide a silver lining to the escalating trade war

A collective sigh of relief was expelled on Friday evening as US President Donald Trump announced he would indefinitely suspend the planned imposition of tariffs on Mexico — which was set to go into effect on June 10. Markets have entered “risk on” mode, given that the crisis was averted. However, we need to recognize that the announcement that the US would apply a tariff on Mexican goods as a way to address immigration was a “game changer.” I believe strongly that just the threat of using tariffs to achieve nontrade policy objectives is very concerning and will likely contribute to a significant escalation in economic policy uncertainty — even though the current situation has been resolved.