The President Donald Trump’s tendency to shake up the world trade landscape by announcing tariffs is a common theme.
Wall Street, however, has mostly ignored the threat, as stocks have rallied in spite of trade uncertainty.
Why this apparent disconnect, then?
Tariffs have had a limited effect so far.
Trump’s initial tariff announcements often cause market volatility, but Tom Lee of Fundstrat told Fortune that “so far the news we’ve heard on tariffs has been more than just a buzz, which means they have proven to be an opportunity for investors to purchase.”
Investors have obviously learned to distinguish between President Trump’s words and his actual trade policy.
Metals Tariff Equation: Impact less than expected?
Although steel and aluminium duties are of concern to manufacturers, especially automakers, the overall impact could be smaller than first feared.
Canada is the top importer of metals to the US, sending $7 billion annually in steel, and $9 billion in aluminium.
This is only a fraction of the almost $500 billion worth of goods and services that are traded between these two countries.
Tariffs reciprocal: A negotiating tool?
Enthusiasm can be found in the concept of reciprocal duties, which is when the US imports products from another country and imposes the same tariffs.
Trump said to reporters Sunday on Air Force One that if they charge us 130%, and we don’t, this situation will not continue.
Some analysts believe that this is a deliberate negotiating tactic, even though it could turn into a full-blown war of commerce.
Tariffs: The art of tariffs
Ed Yardeni, a market veteran with a positive outlook on the future of markets offers his perspective.
Yardeni told Fortune that “we view this as positive given Trump’s previous plan to impose an uniform tariff of 10%-20% on all US Imports”.
It is possible to have the US negotiate with each trading partner separately. These are Trump’s “art of tariff” deals!
Yardeni thinks that Trump may have abandoned a uniform tariff designed solely to generate revenue by using reciprocal tariffs, indicating a targeted approach.
When asked for comment, the White House referred to President Obama’s Sunday remarks.
Negating with strength
Trump’s past suggests that he is willing to negotiate tariffs.
He agreed last week to suspend duties for Canada and Mexico after both countries pledged improved border security.
In an interview he gave to Fox News on Sunday before the Super Bowl, he indicated that there are more demands on the way, saying that the promises made by the two countries so far were “not enough.”
It’s time to do something. “It’s not sustainable, and I am changing it,” said he when asked whether more needed to be done in the next 30 days.
The ICD published the following article Tariffs and Trade: What Trump’s Latest Moves Mean for Market.
