On Tuesday, Trump changed course once again and decided to go ahead with the 25% tariffs on $50 billion worth of Chinese goods. The Chinese already have their retaliatory tariffs lined up and ready to go, specifically designed to strike at the heart of Trump country in the Midwest and rural America.
Today, Trump announced that he would also go ahead with the steel and aluminum tariffs on Canada, Mexico, and the EU. The purported grounds for this action is "national security". But Wilbur Ross directly contradicted that rationale by claiming these tariffs were designed to put pressure on Canada and Mexico in the NAFTA renegotiation as well as the EU in separate trade talks. In response, Canada and Mexico have already announced their own retaliatory tariffs, and the EU is preparing theirs.
Again, these retaliatory tariffs will probably strike communities in the Trump base of support more than others. Even Ben Sasse recognizes that threat, saying, "This is dumb. Europe, Canada and Mexico are not China, and you don't treat allies the same way you treat opponents. We've been down this road before - blanket protectionism is a big part of why we had the Great Depression". Orrin Hatch released a statement saying these tariffs are essentially a "tax hike on Americans" and House Ways and Means Chairman Kevin Brady said that "these tariffs are hitting the wrong target" and Trump's action "puts American workers and families at risk".
So far, the stock market has barely reacted, down just about 1%, so it appears that this is being treated as just another Trump negotiating tactic. And Trump has already backed down on these tariffs once before. Obviously, trying to read Trump's mind is a fool's errand. But it appears that the pressure on China is related to the North Korean talks and the Canadian and Mexican tariffs are all about NAFTA, as Ross readily admits. The tariffs on the EU are also probably designed to get voluntary quotas on steel and aluminum out of the EU, as the South Koreans have already done.
But I'm pretty sure that our trading partners, especially Canada and Mexico, are getting tired of these extortionary tactics. And, at this point, Trump's actions may be counterproductive as any concessions from Canada and Mexico on NAFTA will now be viewed by their own constituents as caving in to Trump's extortion. Justin Trudeau said that today "a turning point in the Canada-U.S. relationship" and the current Ontario Premier declared "I think that we've all had just about enough of Donald Trump. This is a president who rules by tweet. He's a man who doesn't seem to get that his bluster and his bullying are costing people real jobs."
And many of those lost jobs will come from Trump's base of support. The Chinese have targeted Midwestern soybean and sorghum farmers. The Chinese and the Mexicans have targeted Iowa and Arkansas hog farmers. According to John Murphy of the US Chamber of Commerce, "US steel prices have risen 40% since Jan. 1 and are now nearly 50% higher than in Europe or China. And today the volume of metals imports subject to tariffs is being doubled. The impact on manufacturing and construction will be very substantial." And that manufacturing base is again located in Trump's Midwestern heartland as the map below illustrates:
Trump seems determined to start a global trade war. But that war is likely to harm Trump's own working class base more than anyone. And that may be a very dangerous place for Republicans to be heading into the midterm elections, a fact Republican legislators apparently recognize. Whether Trump does is presently unclear.
Certainly, the trade war has made a huge impact on world economic growth. Most of the Asian countries will show a slow down in there GDP growth as the tax seems higher on import and export .SGX Stock Market
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