On Friday, the market was concerned about the latest comments from Trump.
“I’ll be announcing that next week — on reciprocal trade — so that we’re treated evenly with other countries. We don’t want any more or any less,” Trump told reporters in the Oval Office.
Trump has said that he wants US automakers to be treated equally in Europe. Currently the US has a 2.5% tariff on European cars while Europe charges US automakers 10%.
1) Trump actually wants lower tariffs on US companies
The problem is, if this tariff is eliminated, then it's less tariff revenue. That same thinking goes down the line for every tariff that might be put in place.
If the tax cut is the real priority (I think it is), then Trump needs the tariffs. Now rates can vary based on negotiations but the principle of reciprocity works well if you want your companies to be treated better. If you want to raise revenue via tariffs then I wouldn't expect negotiations over tariffs to go anywhere.
That means it will almost-certainly be Congress putting tariffs on and that the likely response will be reciprocity or retaliation from others.
This article was written by Adam Button at www.forexlive.com. Read More Details
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