‘When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.’
US President Donald Trump
You’ve got to hand it to Donald Trump.
He’s got nations around the world reeling from the prospect of a trade war ignited by the latest round of US tariffs.
Trump’s plan will introduce a levy of a 25% on imported steel and 10% on aluminium. That’s atop the recent tariffs on washing machines and solar panels.
Pundits speak of a blow to global economic growth, and a lose-lose scenario for all parties.
Investor uncertainty has seen stock markets tumble.
And Trump just shrugs it all off.
He goes well beyond defending the need for protecting US manufacturers from low cost foreign competition. He actually seems to welcome the prospects of a trade war. Over the weekend he tweeted that they’re good…and easy to win.
‘Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!’
Australia doesn’t fall into this category, importing more from the US than it exports.
According to the Department of Foreign Affairs and Trade, in 2016 Australia’s goods exports to the US were worth $12.4 billion. That compares to Australia’s total imports from the US of $29.7 billion.
Add to that Malcolm Turnbull’s contortions to be ‘besties’ with Trump, and you might think Aussie companies would be exempt.
Not so fast…
From The Australian Financial Review:
‘President Donald Trump’s embrace of an international “trade war” has been compounded for Australia by the US government on Saturday imposing a 51 per cent tariff on Perth silicon metal exporter.
‘Australian-listed companies Rio Tinto and BlueScope Steel are also in the firing line of Mr Trump’s intended separate import tariffs.’
The Brits, perhaps naively, have also been hoping to escape Trump’s tariffs.
The UK also counts among America’s staunchest allies…if you ignore that sticky period from 1775–1783. And like Australia, the UK government is pushing hard to sway Trump’s mind.
As Bloomberg reports:
‘“I just think that the U.S. is not taking an advisable course in threatening a trade war,” U.K. Cabinet Office Minister David Lidington said Sunday on the BBC. “Trade wars don’t do anybody any good.” …
‘He expressed doubt that Trump’s proposal would go ahead.’
Take note of the last line.
Analysts and investors have been doubting Trump’s resolve to follow through on his bluster since day one.
Even now, with US markets closing higher overnight, investors are betting Trump will back down.
That’s a mistake.
Trump has followed through — or at least attempted to — on almost everything he’s said since taking office. Ignore Trump’s rhetoric at your own risk.