The Prospect of Trump’s Trade Tariffs Shook the Markets

Trade Tariffs

As President Trump promises an easy win in coming trading wars, the markets aren’t as confident and respond by tumbling down

“Trade wars are good and easy to win”, said Trump promising to impose 25% tariff on steel and 10% tariff on aluminium supplied to the USA by other countries. He complained that metal imports had been damaging US domestic economy and were a threat to national security. The formal order is expected to be signed next week.

The market quake followed. The Dow went down 420 points Thursday and both the Nasdaq and the S&P 500 dropped about 1.3%. Futures on Friday morning didn’t look much promising either. Shares of some steel producers who don’t operate in the States went down too.

The major worries for the investors are how those who might be hit hardest by the tariffs will respond.

Canada is the largest steel and aluminium supplier for the US, and both China and the European Union have a big share in metal trading with the States. Canada, and the EU have already expressed disappointment and hinted at possible counter actions, while China urged the USA to follow the trade rules.

Should US’ trading partners start imposing tariffs as a response, American manufacturers who also depend on selling their products abroad, could be hurt by retaliating countries.

American farmers can suffer most if China decides to take countermeasures, as the U.S. exports billions in corn, soybeans, pork and other agri-commodities to China.

In addition, domestic aluminium supply in the State is nowhere near the level of the demand, so US consumers might be seeing increased prices of the goods which production is tied to the metal import.

While it is unclear what results can be achieved if the tariffs are to be enforced soon and how they can benefit American economy and security, what’s obvious is that free global trade is about to become a bit less free, and the markets are waiting to see further development and in particular how China will react.

Read the full story in CNN