As President Donald Trump took office, investors were left wondering what his trade policy would look like. While he refrained from imposing new tariffs on his first day, experts warn that duties on Mexico, Canada, and Europe remain a strong possibility.
Uncertainty Persists Despite Brief Relief
Despite the initial relief provided by the lack of new tariffs, economists caution that protectionist policies remain at the forefront of Trump’s agenda. Inga Fechner, Senior Economist at ING Group, notes that “big changes are coming for US trade, even if we didn’t get new tariffs on President Trump’s first day in office.” She points out that Trump has ordered a broad review of US trade policy, with findings expected by April, and that the administration may use emergency powers to impose tariffs if necessary.
Targeted Tariffs on the Horizon
Trump hinted at potential duties on Mexico and Canada as early as February 1, which could have inflationary effects even for the US. Gian Marco Salcioli, Head of Global Markets Strategy at Intesa Sanpaolo, notes how the messaging around tariffs shifted quickly, from a measured approach to a more aggressive tone. He points out that Trump’s comments on tariffs have the potential to impact US consumers and the economy.
European Products Still in the Crosshairs
Alec Phillips, an economist at Goldman Sachs, notes that President Trump’s Inauguration Day policy announcements on tariffs were more benign than expected. However, Goldman Sachs revised its probability of a broad 20% tariff hike on Chinese imports from 90% to 70% but kept a 55% likelihood for tariffs on European autos. Bank of America’s analyst Adarsh Sinha wrote in a note that even if tariffs are delayed, they are likely to be a key policy pillar for the new administration.
What’s Next for Trade?
As the uncertainty surrounding Trump’s trade policy continues, experts warn that tariffs on European products still remain likely. Rogier Quaedvlieg, Senior Economist at ABN Amro, highlights that Europe could also face potential tariffs if European countries do not increase their purchases of US oil. Additionally, Quaedvlieg points out that Trump’s comments about potentially imposing tariffs on China if an agreement on TikTok is not reached add to the uncertainty surrounding trade.
SOURCE: Ref Image from Financial Times
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