The World Trade War that began with the enforcement dictatorial Trump, can cause great corrections to the prices of shares, the International Monetary Fund says in a report (IMF). This in turn can cause market volatility that can threaten financial stability.
The IMF does not refer to specific events, such as the sweeping duties announced by US President Donald Trump in recent weeks. He notes, however, that news measures based on news, including conflicts, wars, terrorist attacks, military costs and trade restrictions have increased abruptly by 2022.
In a accompanying blog, the IMF calls on financial institutions to keep enough capital and liquidity to help them cope with possible losses due to geopolitical risks, and to use stress tests and other analyzes to identify and identify.
In his report, the IMF states that his research has shown that high -risk events such as wars, diplomatic tensions or terrorism have led to a percentage of a percentage percentage average on average shares prices in all countries, with the average decline in emerging economies.
International military clashes, such as Russia’s invasion of Ukraine in 2022, were the most important risk events, pushing down the stock yields on average five percentage points per month, twice the level of other events of geopolitical risk.
The IMF is expected to make public its full report at the Spring Summit with the World Bank on April 21. Trump’s announcements for duties are very likely to dominate the spring meetings.
Last week, there were fiercest turmoil in Wall Street after Covid’s pandemic in 2020. The landmark Standard & Poor’s 500 fell more than 10% after Trump took over his duties on January 20, while gold reached a high record.
Consumers in the US have shown that inflation fears have reached the highest level since 1981, while economic institutions have warned of the increasing risk of downturn.
The IMF also states that economic uncertainty increases the so -called Market Tail dangers – the possibility of extreme, unforeseen losses in an investment portfolio – which in turn enhance the risk of market collapse (stock market “crash”).
He said that increased geopolitical risks also push upward state risk premiums – prices for bankruptcy credit derivatives – and can have an impact on other economies through trade and financial connections.
In the accompanying blog, the IMF examined the impact of US-China tariff actions from 2018 to 2024, noting that some larger scale announcements pushed the shares to lower levels in both countries.
Source: RES – EIA