The US president continues to insist that China's president recently called him. The Chinese side denies this. And the US Treasury Secretary also refuses to confirm it. We have long since entered a world in which a Chinese ministerial official can be trusted more than the US President. It must therefore be assumed that no such conversation took place, but that this very fact makes the failure of US tariff policy so obvious that the US president cannot admit it, Commerzbank's Head of FX and Commodity Research Ulrich Leuchtmann notes.

Irrational governance threatens Dollar's safe-haven status

"On January 23, when the US President first threatened prohibitive tariffs, I wrote: 'If other countries did not send goods to the US every day, export companies in those countries would suffer considerable economic disadvantages. The Americans, however, would literally have to eat grass. It is vital for the US that goods that are not produced there, or not in sufficient quantities, are imported into the country.' This is precisely the scenario that now threatens: empty shelves due to prohibitive tariffs on imports from China."

"The US government, with its legions of Ivy League graduates, should not be steering the country toward such a disaster. But it is precisely this rationality that the US government lacks. That is the real reason to doubt the safe-haven status of the dollar and US government bonds. It is not just the risk of inflation and recession that this policy is currently causing. Its style is such that exactly the same thing could happen again and again."

"Just like the US government, China's leaders are likely to see the trade conflict as a conflict between state and social systems. Call me stubborn, but I consider it fundamentally dangerous to bet against China's willingness to suffer and make sacrifices. However, if neither side gives in, the US economy faces a severe negative supply shock, while the rest of the world faces a positive one. It seems obvious that this would be bad for the dollar. In my opinion, you can only be positive about the USD if you assume that the US president will cave in."