Trump Tariffs Start With More Expected

Donald Trump has set the World on a collision course with worldwide tariffs announced last week starting today.  Alongside Canada and Mexico (with tariffs already live), Germany, Japan, China and the EU as a whole will be hardest hit given they are the USA’s biggest trade partners and therefore wher the US has its biggest trade deficits.

In addition to the 54% levies already confirmed for China, President Trump confirmed a further 54% hike to this.  This puts the USA and China, as the World’s two biggest economies on a massive collision course.  No doubt China will respond with reciprcal tariffs.

That said, the US consumer will also be hardest hit, with businesses paying mush more for materials and imported goods.  It is already esitimated that clothes prices could gp up by over 30% and their smartphones and other tech may double in price.

Comment

We suspect these are scare tactics to get various nations to the negotiating table to agreed trade deals that are fairer to the US and to reduce its trade deficit.

That said, stock markets have already tumbled and bond/gilt yields have shot up driving government debt/borrowing costs up.  This could hurt the USA more than expected given government debt is greater than the capital value of all listed companies registered in the US.  We believe that spiralling borrowing costs may force Trump and his advisers to pare back tariffs to try an stave off a recession but the scare tactic on tariffs have already got the message across to all trading nations.

What to watch for later this week:

• Tariffs postponed or even reduced.
• Higher tariffs for this that reciprocate and increase tariffs on US goods/services.