Global financial system walks in ‘unchartered territory’

(MENAFN) Deutsche Bank's George Saravelos has cautioned that the global financial system is venturing into "uncharted territory" as the escalating US-China trade war risks evolving into a "full-fledged financial war." Saravelos highlighted a collapse in the prices of US assets, including stocks, the dollar, and bonds, and noted that the rapid de-dollarization of global markets is accelerating faster than expected.

He pointed out that this situation differs from a typical crisis where markets usually hoard dollar liquidity to stabilize US assets. Instead, there is growing disillusionment with US assets, prompting widespread selling. Saravelos attributed part of this to actions taken by President Trump's administration, which has encouraged the sell-off in US Treasuries.

The expert warned that the trade war could escalate beyond tariffs and evolve into a financial battle, where China could use its ownership of US assets as leverage. However, he stressed that such a conflict would be mutually damaging to both nations and the global economy. The US has imposed heavy tariffs on China, while Beijing has retaliated with its own measures, creating an increasingly hostile economic environment.

MENAFN10042025000045015687ID1109412784