That is the premise that Trump is going with in wanting to impose reciprocal tariffs, in particular the US' main trading partners with those that have "relatively large trade deficits with the US and apply relatively high tariffs".
In this thread, let's focus on reciprocal tariffs though. Trump has touted he will make an announcement on this either later today or tomorrow.
The easiest proclamation is to label it under the premise of a threat to "national security", as he did with steel and aluminum tariffs. But it's not going to fly on this surely as it involves all trade with so many countries.
Besides that, logistically it will be an absolute nightmare to get all of this done quickly.
So, does reciprocity also mean lowering tariffs altogether? Or is Trump just going to stick with tariff increases to make it fair game?
For now though, markets are evidently not all too frightened. Wall Street extended gains in trading yesterday, even if US futures might be a little lower today. The dollar is steady but not really seeing standout gains to start the new week. As for the bond market, there is some selling which saw 10-year yields creep back up to near 4.50%. So, that will be one to watch in case of anything.
This suggests that traders are learning from their lesson in the past two weeks. Trump wants to make a show of all of this and go big in the opening salvo. Things will then get watered down before a promise of negotiations, with a chance for him to eventually claim that he has made "the biggest and best trade deal ever" for the US. We've seen this before.
In other words, it's going to be tough to keep risk trades down for long unless Trump is really promising trade wars for longer. However, as long as there's room to talk, market players are likely to look at all of this with a glass half full approach instead. So, we'll see what the headlines will bring in the next few days.
This article was written by Justin Low at www.forexlive.com. Read More Details
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