What is a Trade War?

Understanding Trade Wars

A trade war occurs when countries escalate tariffs, quotas, or other trade barriers to protect domestic industries or gain negotiating leverage. Each round of retaliation distorts supply chains, raises production costs, and injects uncertainty into global growth prospects—conditions that reverberate through currency markets.

How Trade Wars Escalate

• Tariff rounds: Initial duties prompt retaliatory measures, often expanding from targeted goods to broad consumer products.
• Non-tariff actions: Export controls, subsidies, and stricter regulations can intensify the conflict even without headline tariffs.
• Currency rhetoric: Governments may accuse rivals of manipulation, raising the risk of intervention or coordinated responses.

Forex Impact

Export-dependent currencies—such as CNY, KRW, and MXN—typically weaken during trade disputes, while safe havens like USD, JPY, and CHF gain as investors seek stability. Commodity currencies (AUD, NZD, CAD) can suffer when global demand expectations fall. Track equity indices and commodity prices; they often confirm shifts in risk sentiment sparked by trade headlines.

Trading Considerations

News hits unexpectedly. Keep leverage modest, widen stops around planned announcements, and diversify exposures to avoid concentration risk. If tensions drag on, central banks may adopt dovish stances to cushion growth, creating additional FX moves.

Advanced Guidance

Build a repeatable, rules‑based process so decisions are consistent across sessions and instruments. Start from context (higher‑timeframe structure, positioning, macro tone), then define precise triggers and invalidation on execution charts. Track spread and depth so your order type matches conditions. Pre‑compute scenarios (breakout, fakeout, mean‑revert) and map actions for each to reduce hesitation.

Execution Framework

• Plan entries at levels with confluence (structure, momentum, time‑of‑day).
• Place stops beyond the logical invalidation, not arbitrary distances.
• Target at least 2–3R; scale out methodically and trail remainder.
• Avoid thin liquidity windows unless the setup explicitly requires it.
• Record slippage and spreads; poor fills can erase edge.

Review Loop

• Journal setups by session and pair to learn where they excel.
• Tag trades by catalyst (news, trend continuation, range breakout).
• Recalculate expectancy monthly; prune underperforming variants.

Risk Controls

Keep daily loss limits, reduce size after consecutive losses, and pause during regime shifts. Survival enables compounding; treat discipline and execution quality as part of your edge.