Following Trump’s tariff announcement on 2 April, it was not only the stock and bond markets that were in turmoil. The consequences of this risk-off sentiment were also clearly visible in the currency markets. CEE currencies reacted to stock market upheavals with price losses. In April, the RUB and TRY weakened against the USD in response to movements of the USD against the euro.
Consolidation Until Further Notice
In response to the upheaval, Trump has postponed the reciprocal tariffs for 90 days. It is doubtful that an agreement can be reached with even the most important trading partners in this short period of time. This would cost them a lot and benefit the USA. Nothing can be done quickly; the question is how far Trump is willing to go to get his point across.
Over the next two months, I do not anticipate any extreme developments, but rather a temporary halt to the recent rise in the stock market, which has almost returned to its initial levels. Given the current high valuation levels in the stock market, this cannot be considered sustainable, especially if trading issues persist.
Russia Does Not Bend
The USA has concluded a treaty with Ukraine outlining the future joint exploitation of raw materials. This demonstrates the USA’s commitment to Ukraine’s territorial integrity and its readiness to collaborate.
Putin failed to achieve his goal of overrunning Ukraine in 2022, and now aims to annex Crimea, establish a corridor to it, and capture eastern Ukraine.
Donald Trump wanted to achieve peace with Russia and confirm these goals. However, Putin is reluctant because he has learned that the West cannot be trusted. After more than three years, the cost of the war is high in terms of both human lives and material resources. If the minimum objectives appear to be secured, Russia may agree to a ceasefire. It is unlikely that Russia will achieve more because Ukraine is losing too much and will hardly be prepared to strive for a lasting peace.
Turkey and Syria
Turkey has significant economic and geopolitical interests in Syria that are threatened by Israeli attacks. It is unlikely that Turkish troops will oppose Israel. Ultimately, both states are networked via Europe and the USA. However, it should not be underestimated that Turkey itself may eventually feel compelled to intervene in Syria. From an economic perspective, the US trade war with the rest of the world, particularly Europe, could not be more beneficial to Turkey. Europe must now strive for a better relationship with Turkey, not only as a manufacturing country, but also as a producer and sales market for war goods.
