Financial markets keep Trump in check

The financial markets have responded nervously in some cases to the latest escalation in the trade dispute between the USA and China. This seems to be holding US President Trump back from aggravating the conflict further. However, negotiations are expected to be slow going and after reaching a deal with China, the USA will turn its attention to the issue of auto tariffs, which for the most part impact Europe. Central bankers are ready to take countermeasures. We expect the ECB to demonstrate that it is capable of taking action as early as June by lowering the deposit facility rate to -0.5 percent in combination with introducing a tiered deposit rate.