Ignore Trump’s Bluster at Your Own Risk

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.

He added:

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.

Bernd Struben

Bernd Struben

Bernd Struben is the lead editor at The Australian Tribune. Bernd makes use of his extensive network to bring you the top stories you need to know about each day. Stories the mainstream may miss. Or bury somewhere you’re unlikely to ever read them. Bernd studied aerospace engineering and journalism at the University of Michigan, before graduating with a degree in economics. Over the past two decades he’s worked in media, management, and finance in the US, the Caribbean, Europe, and Australia. His other role, as the editor of the Port Phillip Insider, puts him in a unique position to read Australia’s most exclusive financial advice. Some of which he shares with readers of The Australian Tribune for free.
Comments: 1

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  1. Yes .
    That simplistic view of his Trade hawks which matches his own beliefs completely ignores the realities.
    US interests overseas bring huge Dollars back to the US, just look at Aust, the number of largely or fully US companies operating within Australia, employing the minimum and in the Case of the offshore Gas producers etc, using cheap imported FIFO labor that don’t pay tax and lets not talk about tax and how WA Libs spent all the Royalty money providing facilities and infrastructure for them.
    Worldwide those foreign operations of US Companies will face extra interest and possibly charges on repatriation of profits and or viewing their operational headquarters in low tax regions, tax them as local to their area of actual operation.

    Anyone planning a fishing trip.?, got a nice lively can of worms for you