US
President Donald J. Trump signed a tariff proclamation March 8 at the White
House, including a series of carefully-crafted exemptions for NAFTA partners
Canada and Mexico as well as the possibility for other allies to negotiate
exemptions. Although this was not an Executive Order and thus not yet set in
stone, the new tariffs were announced at 25% on steel and 10% on aluminium
imports and are set to go into effect in 15 days for all countries not ultimately
excluded.
Trump
specifically excluded Canada and Mexico while NAFTA is being renegotiated and
left an undefined amount of “wiggle room” for other US allies to negotiate
tariff exemptions based on bilateral trade consultations as well as their military
spending for shared alliance defence. China was singled out for extensive
trans-shipments and trade displacement in these products on a global basis,
causing a substantial shift in third country steel exports to the US which had
to be addressed.
The tariff
announcements were absorbed domestically as something less than a tsunami. US
markets had meandered for most of the day until the special NAFTA exemption
news circulated an hour or so before Trump’s television appearance. The DJIA
then moved upwards to close at 24,895, up 0.38%, with the Dollar-Euro exchange
rate essentially unchanged.
Other than
the planned resignation of the US National Economic Council Chair Gary Cohn
that was announced on March 6, the US Federal Government is for now holding together
after the tariff announcements, and key officials are talking tough. By
resigning over the tariff issue, Cohn has probably secured himself the highest
possible position for the “righteous resignation” award from the Trump
Administration to-date, but final judgement must await the results of the next
weeks of bilateral negotiations with key US allies.
Republican
Senator Jeff Flake of Arizona reaffirmed his already-announced plans to
immediately introduce legislation invalidating Trump’s tariff plans. House
Speaker Paul Ryan had also previously voiced strong disagreement with the
tariff plan, opting for targeted retaliation against countries found dumping.
It seems
Congress was already upset with Cohn’s departure, at least according to
Washington press coverage. “When it came to economic issues — and, to be frank,
even beyond — he was our security blanket,” CNN noted from Washington on March
7, quoting a senior Republican congressional aide. The essential point is that
even Trump’s Republican allies have been left wondering who they can count on
other than his cabinet secretaries (Wilbur Ross, Steve Mnuchin) regarding
overall trade and economic policy in an increasingly “hollowed out” Trump
Administration and where a senior official with any kind of globalist
perspective might be suddenly left standing alone.
In
February, a senior Chinese delegation led by President Xi Jinping’s top
economic adviser Liu He reportedly had serious trouble lining up the right
Washington interlocutors for bilateral trade and economic talks. For now,
observers note that the weight of defending a multilateral rule-based system
rests on the few globalists working in the Trump Administration, Defense
Secretary James Mattis, Secretary of State Rex Tillerson and Treasury Secretary
Mnuchin.
It is going
to take several days for key US trade partners and trade blocs to digest
Trump’s message and open “exemption’ discussions with US Trade Representative
Ambassador Robert Lighthizer, who will probably become the planet’s most
sought-after American interlocutor for the rest of this month at least.
Coincidentally, EU Trade Commissioner Malstrom has a previously-scheduled
meeting with Ambassador Lighthizer on March 10. But are we that close to a
global trade war? Perhaps not yet, but the risks should not be downplayed.
Prophetic
perhaps was the warning from the World Trade Organization Director-General
Roberto Azevedo earlier this week “An eye for an eye will leave us all blind
and the world in deep recession.”
https://www.neweurope.eu/article/trumps-white-house-proclaims-new-maybe-negotiable-tariffs-take-effect-15-days/