For most of this year, Trump has largely mitigated the escalation of trade wars that defined much of his presidency in 2018 and 2019. Pundits now fear that his aggressive and seemingly unexpected actions on trade ahead of the election could risk disrupting an economy that is already shaking. of the pandemic.
“This recent surge of stocks reflects a decision by Trump’s re-election team that they need a few very clear messages to have a chance of winning,” said Gary Hufbauer, a trade expert at the Peterson Institute for International Economics in Washington.
“It will be a continuous and growing drama until the elections, and perhaps until January 20,” he added.
Trump, who launched a wave of commercial antipathy against the White House in 2016, appears to have turned a corner last year, from finalizing the US-Canada-Mexico deal to signing the ” phase one ”with China in January.
But with polls showing him behind the alleged Democratic candidate Joe BidenJoe BidenBiden says Trump’s executive order is “a reckless war on Social Security.” Trump had a lead exchange with top GOP donor Adelson: Blumenthal report calls for declassification of documents detailing Russian threat to US election MORE nationally and in major battlefield states, Trump has once again increased the pressure on trade.
Speaking at a Whirlpool plant in Ohio on Thursday, he announced the reimposition of the aluminum tariff on Canada.
“Several months ago, my administration agreed to lift these tariffs in exchange for a promise from the Canadian government that its aluminum industry would not flood our country with exports and kill all of our jobs in the industry. aluminum industry, which they did, ”Trump said.
Hufbauer called Trump’s move a political stance more than providing an economic advantage to the United States.
“The aluminum tariff does not enjoy any support from the business community in the United States, including aluminum producers,” Hufbauer said.
Canada reacted quickly to Trump’s announcement, imposing its own counter-tariffs on US aluminum products.
More worryingly, Trump indicated that something bigger was in the works.
“I’m going to sign something very important in the next week, probably. And that will have a huge impact on fairness and trade, ”he said Thursday.
On the same day, he announced executive decrees that would essentially ban China-based TikTok and WeChat apps in late September, as part of a series of escalations with China that included the secretary of state. Mike PompeoMichael (Mike) Richard PompeoBeirut poses a test for American aid to a frustrating ally. formally rejecting Beijing’s claims on the South China Sea.
“This action has not been divorced by the trade war at all,” said Peter Cecchini, founder of AlphaOmega Advisors, referring to Pompeo.
The South China Sea, Cecchini noted, is a major sea route.
Trump’s rapid targeting of Canada and China has drawn criticism on Capitol Hill, especially as Canada is seen as a trusted ally and neighbor.
“President Trump is right to continue to confront China for its unfair trade practices,” said Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest Grassley McConnell Takes Action on Coronavirus Relief Bill GOP Chairs hit back at accusation of spreading misinformation with Biden On The Money inquiry: The debate over unemployment sparks GOP divisions | Pandemic reveals flaws in unemployment insurance programs | Survey reveals nearly a third of rehired workers are fired again READ MORE (R-Iowa) said. “The administration should also work with Canada to focus on ending China’s trade abuses.
Chairman of the House Ways and Means Committee Richard NealRichard Edmund NealBiden Says Trump Executive Order Is “A Reckless War on Social Security” Conservatives urge Trump to take unilateral action to suspend payroll tax collection The Treasury to conduct political review of the status of university tax exemption after Trump tweets MORE (D-Mass.) Was more critical.
“The president has consistently overlooked American workers and industry with his haphazard and half-baked policies,” he said. “This is just another example. “
Tori Smith, a trade expert at the conservative Heritage Foundation, said the new trade barriers would only undermine the economic recovery.
“This shows very clearly that the administration is not really prioritizing a pro-growth business strategy,” she said.
What Trump does next puts trade watchers and the markets on edge.
One of the potential steps is to remove the Phase 1 deal entirely and increase tariffs on China. As the coronavirus pandemic sets in, Trump has repeatedly said he is “torn” over whether to keep the deal alive.
Another possible avenue would be the unprecedented use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs under the guise of an emergency. Last year Trump threatened to use those powers against Mexico over illegal immigration, but then backed down.
The IEEEPA was the basis for Trump’s executive orders on TikTok and WeChat.
A significant escalation of any trade dispute could send markets back into a free fall and undermine ailing companies less than three months before the election.
But Cecchini believes the markets are more concerned with the immediate problems, and the wider damage to consumers and the economy would likely come further.
“Right now people are blinded by other things, the resumption of the pandemic and the budget response,” he said.
“So although over time it will matter – it will be the biggest risk to the market – right now people are focusing on other things.”