This week the US president unleashed surprise tariffs on Brazilian and Argentine steel imports. He also proposed up to 100% levies on $2.4bn of French imports of cheese, wine and luxury goods in retaliation for a digital services tax that Washington says disproportionately targets US firms. The announcement sent stockmarkets plunging. America’s S&P 500 had its worst day in almost eight weeks on Monday, while the FTSE 100 slid to a six-week low on Tuesday.
The steel levies are “ludicrous”, says John Authers on Bloomberg. Donald Trump says that they are in retaliation for the weakness of the Brazilian and Argentine currencies, which is hurting US farm exports. But “it is absurd to complain that Argentina, a nation with inflation of more than 50%” that is emerging from a serious economic crisis, has a weak currency.
The most likely explanation is that the president simply doesn’t know what he is talking about. But it is also just possible that people in his administration are looking to punish two key beneficiaries of China’s hunt for new agricultural suppliers. It also increases the pressure on the US Federal Reserve to cut interest rates yet again.
With next year’s election approaching, most traders thought Trump would shelve his trade antics, says The New York Times’s DealBook. But his decision to spread tariff mayhem across two new continents shows that “no one is safe”. Trump alternates between the “id and ego” of “Dow Man vs. Tariff Man”, Chris Krueger of Cowen Washington Research Group tells Tory Newmyer in The Washington Post. The upshot? Don’t bet on “Christmas calm” in the markets, says Newmyer.