While trade tensions heat up, Mohamed El-Erian told CNBC that the US is winning the Trade War.
“In relative terms, we are winning and will win the trade war,” El-Erian, economic at Allianz, said Monday on Fast Money. El-Erian is considered to be one of the most influential financial market thinkers in the world.
“Just look at the performance of U.S. markets relative to China and relative to others,” said El-Erian, who was the former CEO of Pimco, “That is signifigant.”. (Source: CNBC.com, “The US is ‘winning’ the trade war, says Mohamed El-Erian”)
President Donald Trump first mentioned the idea of imposing tariffs in March, as a way of correcting what he felt was unfair trading practices that harmed the US economy. Last week the President stuck to his guns as he implemented $34 billion in tariffs on Chinese goods. There was an immediate retaliation from Beijing with tariffs equal in value on US imports, while they accused the US of starting the “largest trade war in the world”.
Meanwhile, the stock market has been in a state of anxiety over how the tariffs would affect different stocks and the global market as a whole. All three of the major indexes closed up Monday, leaving many with the impression that the fear of the trade war impacting the market was fading.
“The tit for tat continues, but ultimately it doesn’t lead to a full blown trade war,” El-Erian said.
“When people realize 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,” he said.
There are still those who are fearful that Donald Trump’s non traditional negotiating tactics may have gone too far, and damaged international relations in the process. El-Erian said 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.
“The rest of the world is less solid then the U.S.,” El-Erian said.