Tariffs: How will US trade partners respond? - NBF

According to National Bank of Canada’s analyst, Krishen Rangasamy, Trump’s tariffs may just be political posturing ahead of November’s mid-term elections.

Key Quotes:

“From the perspective of free trade proponents, March 2018 will be remembered as a month of infamy. After imposing tariffs on steel and aluminium, the White House is set to announce a new set of tariffs today, this time directed at China. How will U.S. trade partners respond? In addition to lodging formal complaints to the World Trade Organization (which will take several months, if not years, to get a settlement), some may also want to push for retaliatory measures.”

“Several U.S. trade partners, including China, have ample room to raise tariffs without even having to infringe rules of the WTO. This tit for tat response is, of course, not conducive for trade flows and hence overall global GDP growth.”

“Nobody really wants a trade war. So, why is the White House doing this? Trump’s tariffs may just be political posturing ahead of November’s mid-term elections. After all, that strategy worked for Republicans in the past as they succeeded in increasing their representation in both houses of Congress at the 2002 midterm elections, before George W.Bush’s steel tariffs were lifted a year later. But a similar election result is no guarantee this time. As one would recall, G.W.Bush had the sympathy of voters after the terrorist attacks, and the early years of his administration were largely scandal-free.”