Question

Donald Trump just announced large tariffs on steel and aluminum effective next week. The announcement has already affected the market with major sell offs yesterday and today. Focus on how the president could negatively impact the global economy by simply sending a tweet or announcement which sends ripple effects across the financial markets globally? (300 Words)

Answer 1

Donald Trump recently tweeted that USA has been exploited by many countries around the world by unfair trade practices and he stated that he wanted to protect the American companies and workers from this kind of unfair trade. He took a bold decision regarding imposing the tariffs on imports. He said US will be imposing 25% tariffs on imports of steel and also 10% of tariffs on aluminum imports from second week of March. Because of this announcement world financial markets tumbled. For example Japan's Nikkei index went down by 2.4 %. South Korea and Hong Kong fell by 1.6 % . Japan's steel giant Nippon fell by 4%. All these indicate the negative impact of the decisions taken by the president of USA.

Now let me explain about the negative effects of decisions, tweets and announcements of Donald Trump.
After globalization, almost all the financial markets in the world are interlinked with one another. If something happens to one market, it will affect other markets also. If the index of one market falls, then indices of many other markets also will tumble.
United States of America is the largest economy in the world with almost $19 trillion. Obviously whatever happens in the economy of US will affect the world economy, because many countries have trade relations with the US. There is a famous saying regarding this, that is "If USA sneezes, whole world will catch cold".
One more example for this kind of effect is decision on H1B Visa. Trump has been tightening the rules regarding the H1B visa. This decision has adverse impact on software companies, especially the Indian companies. Because the employees who dream of settling in USA, while working for Indian companies will not have that facility from now on. Indian companies try to send employees from India to work for their clients in the US. If they want to hire employees from USA itself, it would cost them very high, so they recruit employees from India only and send them to US for rendering services for their clients in US. In this kind of situation, making the rules of H1B visa more stringent would have adverse effect on Indian software companies as well as the companies from other countries. If Trump makes even a single statement about the H1B visa, the stocks of these companies react sharply. In the same way many financial markets react very fast when Donald Trump makes an announcement or a tweet. The main reason is the inter linkage among all the financial markets around the world.