DAILY BASKET – NEWS COMMENTARY
US Trade War?
MARSAL COMMENTS: President Trump seems determined to “Make America Great Again”. One obvious step is to reduce the trade deficit with the world. The US imports far more than it exports. The simple and fast way to do that may be to levy import tariffs on products from the main US trading partners; China and Germany.
Despite the US cabinet’s rejection of raising import duties, Trump seems to be adamant on going ahead. He may start with 20% duties on Chinese steel and other products. Will German duties follow? We will see after the anticipated confrontational G20 meeting.
In all cases, this first step is not likely to make China happy. On the contrary, if it does materialize, we could be in for a hot spell of retaliations.
In the long term, import duties do not necessarily correct a trade balance deficit, especially in items that are needed and not manufactured locally. A better strategy could be to encourage local growth through more useful spending, as opposed to excessive military budgets.
NEGATIVE FOR: China and the world trade. Eventually, also for the US.
POSITIVE FOR: US in the Short term.
IMPACT POTENTIAL: High
TIME SCOPE: Medium and Long Term