President Donald Trump has imposed sanctions against selected Chinese and Russian companies over their alleged business dealings with North Korea.

This return to an economic foreign policy is relatively simple as such measures can be imposed by the president without regard to Congress, not that Congress would necessarily have opposed such a move.

Trump seems to be inclined to focus on areas where the president can act without Congressional approval or with only limited Congressional approval.

The move may well increase the rhetoric that comes from North Korea and it may also of course create some tensions with China, but such a step cannot be that surprising to U.S. as well as international investors.

Trump also threatened NAFTA, the North American Free Trade Agreement with Canada and Mexico: “Personally, I don’t think we can make a deal … I think we’ll end up probably terminating NAFTA at some point.” The interesting point here is that Trumps’ comments come after the NAFTA renegotiations officially only started a week ago on August 16.

Maybe it could be helpful for investors to keep in mind that the debate over free trade was one of the central topics of Trump’s campaign and he called NAFTA "the worst trade deal in the history of the country."

Also on Tuesday, President Trump threatened to bring the U.S. government to the brink of a shutdown if needed to pressure Congress into funding the border wall that was a centerpiece of his 2016 campaign.

Politico writes: “The fight over the wall is likely to explode in September as the administration wrangles over a new budget, an increase in the debt ceiling, the beginning of a tax reform package and a possible resuscitation of health care legislation. Trump has told his advisers he will not accept a deal on other issues without money for the wall “and it has to be real money,” said one senior White House official.

The president is also expected to soon address the topic of immigration, which is another area where presidential authority escapes much Congressional oversight.

Investors will probably monitor the remarks in an attempt to gage the extent to which Chief of Staff Kelly has been able to exert a moderating influence on the President.

Over in Europe, ECB President Draghi gave a speech in Lindau, Germany.

As expected, his speech did not address current key market concerns like how exactly the ECB intends to tweak its bond buying in 2018 and the current level of the euro.

However, Draghi, who is of course Italian, was speaking at a time when Italian bonds have been weakening against the European peers.

As confirmed in his speech, there is no threat of ending quantitative policy accommodation anytime soon and therefore should not be considered as a serious a challenge for countries such as Italy, and in case that would be necessary, Italians do know a thing or two about financing large amounts of debt having had years of practice.

However, some moderate political risk with the possibility of quantitative policy accommodation coming to a conclusion albeit at a very, very slow pace has perhaps understandably encouraged limited spread widening in the bond markets.

Besides that, today we got the headline IHS Markit Eurozone PMI that came in at 55.8 in August, up fractionally from July’s reading of 55.7, according to the preliminary flash estimate (based on approximately 85 percent of final replies).

Andrew Harker, Associate Director at IHS Markit commented: “The latest PMI readings for the eurozone signal a continuation of the recent strong performance of the economy. This stabilization in the rate of expansion is pleasing, following signs of growth easing in recent months. There was further evidence of growth cooling in the service sector, where both business activity and new orders rose at the weakest rates since January.”

Investors could do well not to forget that a rise or fall in a PMI does not indicate that economic activity is improving or contracting. It indicates that the sentiment of a small group of unrepresentative companies is somewhat better or less better.

The correlation of that sentiment with economic reality has been getting steadily worse in recent years, and sentiment data has been increasingly likely to overreact to underlying economic trends.

As an investor, I certainly wouldn’t switch into “risk on” mode at the moment. On the contrary, I would try to extent further the defense positions of/in my portfolio.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.