{"id":16749,"date":"2018-03-05T07:21:24","date_gmt":"2018-03-05T11:21:24","guid":{"rendered":"http:\/\/www.pgmcapital.com\/?p=16749"},"modified":"2018-03-05T07:21:24","modified_gmt":"2018-03-05T11:21:24","slug":"will-the-trump-imposted-tariffs-lead-to-a-global-trade-war","status":"publish","type":"post","link":"https:\/\/www.pgmcapital.com\/nl\/will-the-trump-imposted-tariffs-lead-to-a-global-trade-war\/","title":{"rendered":"Will the Trump Imposted Tariffs lead to a Global Trade War?"},"content":{"rendered":"<p>Dear PGM Blog reader,<\/p>\n<p>On Thursday March 01, USA, President Trump told business executives gathered at the White House he would\u00a0impose tariffs\u00a0on steel and aluminum next week.<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/players.brightcove.net\/293884104\/SJa0Thl7_default\/index.html?videoId=5743304664001\" width=\"300\" height=\"150\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>The questions most investors are asking themselves is will the imposed tariffs to a global Trade War?<\/p>\n<h3>INTRODUCTION:<\/h3>\n<p>Trump\u00a0doubled down on Friday, March 02, on his proposal to add a 25% tariff on steel imports and a 10% tariff on aluminum imported to the United States from other\u00a0countries, a move that prompted a sell-off in U.S. equities and the dollar after it was announced on Thursday.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/finance.yahoo.com\/video\/stocks-slide-trade-war-fears-183108683.html?format=embed\" width=\"640\" height=\"360\" frameborder=\"0\" scrolling=\"no\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p class=\"speakable\">As can be seen from below chart, the Dow dropped 420 points on Thursday March 01, after President Trump said his administration\u00a0will impose tariffs on steel and aluminum imports. The Nasdaq and the S&amp;P 500 declined 1.3% each.<\/p>\n<p><a href=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2018\/03\/Screen-Shot-2018-03-04-at-1.14.35-PM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-16769\" src=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2018\/03\/Screen-Shot-2018-03-04-at-1.14.35-PM-300x152.png\" alt=\"\" width=\"500\" height=\"253\" srcset=\"https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2018\/03\/Screen-Shot-2018-03-04-at-1.14.35-PM-300x152.png 300w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2018\/03\/Screen-Shot-2018-03-04-at-1.14.35-PM-768x389.png 768w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2018\/03\/Screen-Shot-2018-03-04-at-1.14.35-PM-1024x519.png 1024w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2018\/03\/Screen-Shot-2018-03-04-at-1.14.35-PM.png 1208w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><\/p>\n<p class=\"speakable\">Trump&#8217;s controversial tariff announcement caught investors off guard and immediately raised concerns about retaliation from China or other major U.S. trading partners.<\/p>\n<p>The steel and aluminum tariffs are manageable. But if the president is so gung-ho about a trade war, and is now willing to ignore his more cautious advisers, what comes next might not be.<\/p>\n<h3>PGM CAPITAL ANALYSIS &amp; COMMENTS:<\/h3>\n<p>To understand why the worry about President Trump\u2019s planned steel and aluminum tariffs goes so deep on Wall Street and in corporate America, don\u2019t think of Thursday\u2019s news as being about a new tariff on steel and aluminum.<\/p>\n<p>Rather, think of it as a signal about the willingness of the president to ignore his most sober-minded advisers and put the global economy at risk to achieve his goal of better terms for American trade.<\/p>\n<p>Steel imports were worth about $30 billion in 2017, and aluminum imports around US$17 billion, according to\u00a0<a class=\"css-1dccl0s eo5o5yb0\" title=\"\" href=\"https:\/\/www.bea.gov\/newsreleases\/international\/trade\/2018\/pdf\/trad1217.pdf\" target=\"_blank\" rel=\"noopener\">government data<\/a>. Even in the simplest possible way of thinking of the potential cost of the new tariffs \u2014 just applying the 25 percent tax on steel and 10 percent tax on aluminum the president plans \u2014 we\u2019re talking about only US$9 billion. And that\u2019s before accounting for the resulting shift toward domestic production that is the entire point of the policy.<\/p>\n<p class=\"css-gk4ay5 e2kc3sl0\">More complex modeling would be needed to produce a reliable estimate of the cost of the tariffs, but the point is about the order of magnitude. These are not numbers that are enough to cause much damage to a $20 trillion economy, or to justify the US$460 billion decline in the value of the stock market that took place between Thursday\u2019s open and Friday midday.<\/p>\n<p class=\"css-gk4ay5 e2kc3sl0\">Last week market drop makes more sense if you look at the president\u2019s announcement not in terms of what it means for imported steel and aluminum, but rather what it says about the president himself.<\/p>\n<p class=\"css-gk4ay5 e2kc3sl0\">Financial markets tend to extrapolate, looking at small pieces of information today to project what the future will look like.<\/p>\n<h4>The IMF Warns:<\/h4>\n<p class=\"story-body__introduction\">The International Monetary Fund (IMF) has joined criticism of Donald Trump&#8217;s plan to impose a 25% tariff on steel imports and 10% on aluminium.<\/p>\n<p>The body warned that such a move would hurt the US as well as other countries.<\/p>\n<p>It said others could follow the US president&#8217;s precedent by claiming tough trade restrictions were needed to defend national security.<\/p>\n<h4>Are we heading to Global Trade War:<\/h4>\n<p class=\"speakable\">In a trade war, countries impose tariffs and other barriers on imported products, often in retaliation for actions taken by a trading partner.<\/p>\n<p class=\"speakable\">That can slow down business activity around the globe by crimping international trade. In a worst case scenario, trade wars can lead to a global depression. Protectionist trade polices are one of the primary factors economists cite for deepening the\u00a0<a href=\"http:\/\/money.cnn.com\/2016\/07\/07\/news\/economy\/trump-trade-smoot-hawley\/index.html?iid=EL\">Great Depression<\/a>.<\/p>\n<p>But President Trump doesn&#8217;t believe that. He tweeted out Friday, March 2nd in the morning that for the United States, a trade war is &#8220;good&#8221; and &#8220;easy to win.&#8221;<\/p>\n<p>In a trade war, US consumers and businesses will be left with the bill.<\/p>\n<p>A trade war by definition means that other countries are going to slap tariffs and restrictions on those US goods and services, making them more expensive, and less competitive &#8212; if they&#8217;re allowed into those countries at all.<\/p>\n<p>The European Union, Canada, China and other nations\u00a0have already declared\u00a0they will retaliate if the tariffs become law. One EU official even called the proposals a \u201cdeclaration of war.\u201d<\/p>\n<p>According to Max Baucus a former\u00a0U.S. ambassador to\u00a0China, Beijing\u00a0will respond negatively to President\u00a0Donald Trump&#8217;s announcement of tariffs on steel and aluminum imports.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/player.cnbc.com\/p\/gZWlPC\/cnbc_global?playertype=synd&amp;byGuid=7000002856&amp;size=640_360\" width=\"640\" height=\"360\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<div class=\"group\">\n<p>He said invoking the\u00a0national security argument\u00a0for higher tariffs may well backfire.<\/p>\n<\/div>\n<p>If the U.S.A. uses a broad interpretation of national security nothing will hold back others. And Trump may end up rethinking whether his tariffs on steel are worth duties on Florida oranges, Wisconsin Harleys and Kentucky bourbon.<\/p>\n<p class=\"css-gk4ay5 e2kc3sl0\">Jean-Claude Juncker, president of the European Commission, made the remarks to the German news media in reaction to the proposed tariffs. He said the plans to tax the American goods, produced in the home states of key Republican leaders, had not yet been finalized, but amounted to treating them \u201cthe same way\u201d that European products would be handled if the metals tariffs go through.<\/p>\n<p>Yours sincerely,<\/p>\n<p><a href=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-14\" src=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric.jpg\" sizes=\"auto, (max-width: 112px) 100vw, 112px\" srcset=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric.jpg 160w, http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric-150x150.jpg 150w\" alt=\"\" width=\"112\" height=\"112\" \/><\/a><\/p>\n<p>Eric Panneflek<\/p>","protected":false},"excerpt":{"rendered":"<p>Dear PGM Blog reader, On Thursday March 01, USA, President Trump told business executives gathered at the White House he would\u00a0impose tariffs\u00a0on steel and aluminum next week. The questions most investors are asking themselves is will the imposed tariffs to a global Trade War? INTRODUCTION: Trump\u00a0doubled down on Friday, March 02, on his proposal to<a href=\"https:\/\/www.pgmcapital.com\/nl\/will-the-trump-imposted-tariffs-lead-to-a-global-trade-war\/\">[&#8230;]<\/a><\/p>\n","protected":false},"author":2,"featured_media":16773,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51],"tags":[],"class_list":["post-16749","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pgm-capital-blog"],"_links":{"self":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/16749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/comments?post=16749"}],"version-history":[{"count":23,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/16749\/revisions"}],"predecessor-version":[{"id":16774,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/16749\/revisions\/16774"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/media\/16773"}],"wp:attachment":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/media?parent=16749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/categories?post=16749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/tags?post=16749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}