Trade deals – and why they can affect your money

The machinations of politicians are all very interesting, but many of us are more concerned by the money in our pockets – not to mention our investments and pension pots.
However, as recent events have shown, the events on the political stage actually affect our personal worth.
Last Friday, China and the U.S. announced plans to resume trade negotiations. This fuelled hopes that both countries were edging toward a deal.
Chinese President Xi Jinping expressed hope for “a mutually beneficial and win-win agreement”. His opposite number, U.S. Trade Representative Robert Lighthizer observed “ We feel we have made headway on very, very important and difficult issues”
World stocks rose on ahead of the trade talks that took place between Chinese and American officials in Washington this week. The current tariffs truce between the two economic superpowers will expire next month, leaving the U.S. free to more than double import taxes on $200 billion in Chinese goods, a prospect which made investors worry for the future of the global economy. The news that talks were back on was enough to make them breathe a sigh of relief – reflected in upward movements on several exchanges.
Asian exchanges closed higher, France’s CAC 40 gained 0.3% and the DAX in Germany was up almost 0.1%.
If simply talking about trade deals can boost share prices, an agreement could signal a bonanza.

But what exactly is a trade deal?

It is unusual for economists to agree on anything, but most see international trade as beneficial to all. Exporters find more markets, importers have more choice. Consumers, and firms that buy raw materials, components and services, benefit from more trade and economic growth and lower prices

Trade deals boost economic activity by reducing or even removing barriers to trade across borders. Countries taking part want improved opportunities for their businesses to sell their goods and services overseas.

They involve negotiation to reduce tariffs – import taxes designed to protect internal businesses and generate revenue.  They can also try to reduce ‘non-tariff’ barriers, by adopting similar regulations and providing protection for intellectual property such as patents and copyright.

Of course, it is not necessary to have a trade deal with another country to do business with them. The World Trade Organisation has more than 160 member countries, and provides standardised trading terms. The WTO began a new round of trade negotiations back in 2001, but it has produced only modest results. Instead  most countries now focus on making bilateral agreements or trade deals. It is these that have become central to economic confidence.

What about UK trade deals?

Whilst the UK is currently still part of Europe, it can trade freely with European partners, although trade with the rest of the world is restricted by the arrangements set up by the bloc.

With Brexit coming, it is important to arrange deals with trading partners across the world to replace the EU terms.

Currently, the UK has trade deals with 71 countries through agreements struck by the EU to replace. Progress is slow, but deals are being signed at last. On Monday trade secretary Liam Fox signed a trade deal with Switzerland. A handful of other deals have been made, with new arrangements with the Faroe Islands, Chile, Israel and some countries in southern Africa signed and sealed.

As with any negotiation with billions of pounds at stake, some key deals are proving contentious. The government is battling to mend relations with China after Beijing cancelled a key trade meeting with chancellor Philip Hammond. Negotiations with Japan may have soured. But hopefully, these setbacks may be temporary, and part of the machinations mentioned earlier.

It is in everyone’s interests to ensure that deals are struck, and we can probably look forward to a brighter future when they are.

If you are concerned about the impact of international trade on your own financial outlook, it might be wise to get some expert support. A call to Continuum could offer the expertise you need.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of your pensions and investments can fall as well as rise and you may get back less than you invested.

Book a free initial consultation

Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.

Sources: – Asian Shares Gain on Hopes for Progress on China-US Trade – 18th February 2019 – UK signs biggest trade deal since Brexit vote with Switzerland – Asian shares gain on hopes for progress on China-US trade – 18th February 2019 – Trump says he might extend deadline in US-China talks – 16th February 2019 – UK signs post-Brexit trade deal with Switzerland – 11th February 2019

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