US: Possibility of a fundamental structural change in trade policy - Nomura

Research Team at Nomura suggests that the Donald Trump’s victory in the US Presidential election has introduced the possibility of a fundamental structural change in US trade policy – the first in decades.

Key Quotes

“The consistency of Mr Trump’s protectionist ideas over the years suggests that this is the most likely policy to be implemented. While it does mark a departure from Republican Party orthodoxy, a longer historical perspective shows that protectionism was traditionally a Republican stance all the way back to the party’s founder, Abraham Lincoln.” 

“As for the specifics, President Trump has various options. One is to re-negotiate existing trade agreements and switch to bilateral negotiations. A more dramatic path would to be impose import tariffs directly or indirectly (border tax) on other countries. Then there is the possibility of introducing a weak dollar policy. With the dollar at its highest level in real terms in 15 years and a recent sharp worsening in the non-oil US trade balance, there could even be a valuation-based argument for instituting such a policy. The implementation of such a policy would probably not match the Plaza Accord. It could take the form of a tweet, actual FX intervention or even the creation of a sovereign wealth fund. Needless to say, Donald Trump’s position on trade policy should not be ignored.”