(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, March 13 (Reuters) - What matters in U.S.

and global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial

Markets

From one crunch to another, markets are finding it hard to catch

a break as we go from tit-for-tat trade wars one day to U.S.

government shutdown fears the next.

Today I'll take a look at how all of the U.S. policy uncertainty

and diplomatic upheavals have sparked a conversation in global

investment circles about trust and transparency in U.S.

governance and how eroding that could undermine the U.S.

position as the world's dominant investment destination.

Find this and more on today's major market news below.

Today's Market Minute

* President Donald Trump threatened on Wednesday to escalate

a

global trade war with further tariffs on European Union goods,

as major U.S. trading partners said they would retaliate for

trade barriers already erected by the U.S. president.

* Germany's outgoing lower house of parliament will hold a

special

session on Thursday to debate a 500 billion euro fund for

infrastructure and sweeping changes to borrowing rules in

Europe's largest economy to bolster defence.

* The Bank of Canada trimmed its key policy rate by 25 basis

points on Wednesday to 2.75% and raised concerns about

inflationary pressures and weaker growth stemming from trade

uncertainty and U.S. tariffs.

* The Kremlin said on Wednesday it would review details from

Washington about a proposal for a 30-day ceasefire in Ukraine

before responding, while U.S. Secretary of State Marco Rubio

hoped a deal would be struck within days.

* U.S. consumer prices increased less than expected in

February,

Wednesday data showed, but the improvement is likely temporary

against the backdrop of aggressive tariffs on imports that are

expected to raise the costs of most goods in the months ahead.

Can't catch a break

This week's U.S. metal tariff hikes and the instant retaliation

from Europe and Canada are likely only the opening salvos in a

global trade conflict that President Donald Trump appears intent

on ratcheting up in less than three weeks' time.

The rhetoric shows no sign of compromise.

"Whatever they charge us, we're charging them," Trump told

reporters at the White House. "We will not stand idly by,"

Canada's Finance Minister Dominic LeBlanc said of the latest

tariffs moves.

There is background tension in Europe too as Germany's

dramatic fiscal reforms and defence reboot now need to pass

through parliament, with the Green Party's necessary support

still not secured.

The Bundestag lower house of parliament will on Thursday

hold the first reading of the proposal, which electrified

European markets last week. A vote is due next Tuesday.

Back stateside, the focus will be on the Senate. If it

doesn't support the Republican-backed stopgap funding bill, a

partial government shutdown could be triggered as soon as this

weekend.

The whole picture means U.S. stock futures have

reversed all of Wednesday's modest bounce in the S&P500.

And stock benchmarks across Europe and Asia are also in the red.

Meanwhile, Treasury yields pushed higher,

batting away better-than-forecast consumer price inflation

numbers on Wednesday, as the tentative stock market

stabilisation reduced Federal Reserve easing bets once again.

The dollar index was also off slightly.

CPI numbers are now very much in the rear-view mirror for a

Fed waiting to see the impact of tariff hikes, so today's

producer price numbers should also have little market impact.

But what could have quite a bit of market impact over the

long term is the growing sense that the tumult in Washington

could threaten the U.S. position as the world's safe haven.

Exorbitant disruption risks undermining US 'privilege'

There's something more than U.S. tariffs and recession risks

gnawing at financial markets. There's the growing sense that the

chaotic policy disruption in Washington is eroding the world's

trust in U.S. institutions and its assets.

Broken political alliances and economic wars with major

trade partners are having many effects - not least heightened

business uncertainty over what will happen next - but one of the

most notable is the brewing investor concern that America could

lose a chunk of its "exorbitant privilege".

This term, first coined in the 1960s by then French finance

minister Valéry Giscard d'Estaing, essentially refers to the

benefits the U.S. gains from the outsize demand the world has

for U.S. assets as a safe haven. The privilege hinges variously

on the extensive use of the dollar internationally, the U.S.

rule of law and institutional rigor as well as the projection of

its soft power.

The list is much longer than that, but you get the picture.

The sheer size, depth and transparency of U.S. markets, in

combination with the reliability and openness of its governance,

have - for decades - given the U.S. a disproportionate slice of

world capital and the cheaper financing that goes with that.

Could Donald Trump's avowedly disruptive administration call

all that into question and whittle this advantage away?

Financing metrics, such as long-term U.S. borrowing costs,

don't yet suggest that a major fracture is afoot.

But U.S. equity prices have started to correct over the past

month, even as the dollar has weakened - an ominous

combination.

Ultimately, though, the very fact that trust - or the lack

thereof - is part of the U.S. conversation at all is the most

remarkable thing.

On Wednesday, JPMorgan's chief global economist Bruce Kasman

spoke openly about the challenges during a roadshow in

Singapore. He opined about how the U.S. secured its "exorbitant

privilege", citing many of the reasons noted above and including

things like the "integrity of information flow".

The administration's cutbacks to government agencies and

moves to disband the advisory committees assisting with data

collection are also potentially jarring, he said.

"All of those things are part of the uncertainties that have

moved into U.S. policy, and that part of the risk in the outlook

this year I don't think has been appreciated."

'Exorbitant burden'?

Referring to exorbitant privilege, Kasman added: "The risk that

stuff starts to come under pressure and becomes a structural

issue in the markets is not something I would, by any means,

underplay."

This is likely what investors and strategists both within

the United States and around the world have been thinking for

weeks - even if relatively few have verbalized it.

And Kasman is not alone in saying something.

Writing about speculation surrounding the prospect of a

"Mar-a-Lago Accord" to correct U.S. deficits and global

imbalances, former Reserve Bank of India governor Raghuram Rajan

questioned the diagnosis of Trump adviser Stephen Miran and said

it was dangerous for America to play around with its exorbitant

privilege.

Rajan expressed doubt that reforming U.S. macroeconomic

policy would somehow deter overseas savers from the U.S.,

thereby weakening an overvalued dollar or helping to cut U.S.

deficits.

"It is not clear where the Trump administration's current

path of 'shock and awe' is supposed to lead," the former

International Monetary Fund chief economist wrote in Project

Syndicate this week.

"The claim that the dollar's attractiveness is an exorbitant

burden rather than an exorbitant privilege is unpersuasive,

especially when those making such arguments are so reluctant to

give up the burden," he said, referring to the administration's

regular support for the dollar's global status while promoting

policies that undermine it.

"Markets are unnerved by the punishment that the

administration, convinced that the U.S. is a victim, is willing

to inflict on close allies," he concluded. "If such behavior

reduces the attractiveness of the dollar, perhaps it really will

become an exorbitant burden. But that is not a future that any

American should want."

It's good to remember that foreign holdings of U.S.

financial assets nearly doubled over the past decade to some $60

trillion before the recent market ructions.

Given the scale of this cross-border money, if faith in the

U.S. truly is shaken, the outcome could make the year's market

shakeout to date seem very small indeed.

Chart of the day

Stock markets have voted clearly over the past month on the

brewing trade wars and lack of policy visibility in the U.S., as

they've repeatedly hit the "sell" button. Regular voters now

seem to be following suit. A Reuters/Ipsos poll found 57% of

Americans think Trump is being too erratic in his efforts to

shake up the U.S. economy, and 70% expect that tariffs will make

goods more expensive.

Today's events to watch

* U.S. February producer price report, weekly jobless claims

* Federal Reserve reports on financial health of U.S.

households in its Flow of Funds update for 4Q2024

* Bank of France Governor Francois Villeroy de Galhau and

Bundesbank President Joachim Nagel speak together in Paris

* Germany's Bundestag holds first reading of budget reform

proposal

* U.S. Treasury sells $22 billion of 30-year bonds

* U.S. corporate earnings: Dollar General, Ulta Beauty

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.