Trump adds Turkey to his trade wars

Donald Trump is widening his use of tariff threats and imposition of ad hoc tariffs. now targeting Turkey.

Given Trump’s record of withdrawing from or attempting to renegotiate trade agreements, and his spraying around of tariff threats and the ad hoc imposition of tariffs, it will be difficult for the world of trade to have any certainty in what the US may do in the future.

Businesses tend to hate this sort of uncertainty.

Trump is not just using trade weapons to try to drive more favourable deals for the US, he is using them as a punishment.

Washington Post: Trump takes aim at Turkey, announcing doubling of steel and aluminum tariffs in effort to punish country

Turkish President Recep Tayyip Erdogan warned Friday against those who try to “bully” his country, as an announcement by President Trump imposing new tariffs on Turkey sent its currency into free fall.

“The language of threats and blackmail cannot be used against this nation,” Erdogan said in apparent response to Trump’s early-morning tweet saying he was doubling existing U.S. import levies on Turkish steel and aluminum. “Those who assume they can bring us to our knees through economic manipulations don’t know our nation at all,” he said, without directly mentioning Trump or the tariffs.

But the U.S. announcement quickly sent the value of the Turkish lira, already under severe strain, to a record low against the U.S. dollar. The currency crisis has fueled growing concerns in the international financial community and among investors about the health of the Turkish economy.

Trump’s willingness to ratchet up the financial pain on Turkey followed an unsuccessful effort this week to resolve the ongoing dispute between the two countries over Andrew Brunson, an American pastor held on charges that include espionage and trying to overthrow the government.

This seems to be just how trump does things. For Trump, sanctions substitute for foreign policy

For all the talk of “fire and fury” we once heard from President Trump, his administration’s most-frequently used weapons have been not have been explosive — they’ve been financial.

Since entering office, Trump has often used economic sanctions (and, concurrently, tariffs) in an attempt to bend other countries to his will. The administration feels, with some justification, that tough sanctions brought North Korea to the negotiating table.

Now Trump hopes that reinstating sanctions on Iran will also force that country to bargain with the United States and craft a new nuclear deal.

But the evidence that these sanctions are working as a foreign-policy tool isn’t convincing. And there is considerable concern that the Trump administration is overusing them while neglecting other important facets of foreign policy, like simple negotiations or coordination with allies.

The Washington Post’s Carol Morello recently outlined just how prevalent sanctions have become in the Trump era in a recent article. She found that during just one month — February 2018 — the United States had imposed sanctions not only on North Korea, but also groups or individuals in Colombia, Libya, Congo, Pakistan, Somalia, the Philippines, Lebanon and more.

Though their use may be increasing, sanctions are not a new idea — they date back hundreds of years, if not further. Yet academic research has found that they often don’t work as intended. One study looked at 200 sanctions from between 1914 and 2008 and found only 13 that were clearly instrumental in achieving their creators’ aims.

The problem isn’t necessarily that they can’t inflict financial damage on a foe (given the power the United States holds over the global economy, that much is now a given). Instead, the issue is that this damage doesn’t always contribute to any logical foreign policy goal.

Using tariffs and sanctions is a heavy handed way of trying to get what Trump wants – there may be some successes in the short term, but damaging the finances of countries can have much wider effects (like for international investors and those who trade with the targeted country).

And Trump risks burning a lot of diplomatic bridges. Establishing a record of mistrust and unreliability may end up biting the United States on the bum.

 

Trade wars on again in response to Trump’s interventionism

It’;s hard to keep up with Donald Trump’s varying positions on a number of issues, but it looks like trade wards are back on after he imposed tariffs in steel and aluminium imports.It’s too soon to tell what this may escalate into, but the signs look ominous.

Reuters: U.S. isolated at G7 meeting as tariffs prompt retaliation

U.S. President Donald Trump told Canada and the European Union on Friday to do more to bring down their trade surpluses, a day after hitting them and Mexico with import tariffs on steel and aluminum.

Trump castigated Canada, a top U.S. trade partner and ally, in a tweet on Friday morning, saying it had treated U.S. farmers “very poorly for a very long period of time.”

“Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us,” he wrote.

Trump also told French President Emmanuel Macron of the need to “rebalance trade with Europe,” the White House said.

The strong words followed swift responses to the tariffs by Canada, Mexico and the EU, which all plan to retaliate with levies on billions of dollars of U.S. goods, including orange juice, whiskey, blue jeans and Harley-Davidson motorcycles.

ODT: Trade war repercussions likely

By later today,  or early tomorrow, it will be known the extent to which Europe, Canada and Mexico will go to counter the United States’ tariffs.

Canada and Mexico have made early moves but there are suggestions more barriers will be put in place for US exports.

US President Donald Trump unilaterally imposed sweeping tariffs on  steel and aluminium imports from the European Union, and its Nafta trading partners Canada and Mexico.

European commissioner Jean-Claude Juncker is promising to have retaliatory measures in place. In a furious address to a conference, Mr Juncker was threatening like for like, enough to make free-trade countries like New Zealand shudder.

The move is likely to have an immediate impact on global trade in steel and aluminium, particularly between the US and Canada, the largest supplier of imported steel to the US.

A meeting of the Group of Seven, in Canada, was taken by surprise by the announcement. Concern about Mr Trump’s hardening approach to trade dominated the discussion panel as top policy makers from the United States, Britain, Germany, France, Italy, Japan and Canada gathered in the alpine village of Whistler, British Columbia, Canada.

There is growing concern trade wars may turn into real wars — particularly with the ongoing tit-for-tat squabble between China and the US.

On Tuesday, the White House pledged to slap an additional 25% tariff on a long list of Chinese products, including metals. Within hours Beijing retaliated with the promise to lift levies on $US50 billion worth of US imports by 25%. The Chinese list includes soybeans, automobiles, chemicals and aircraft. In response, Mr Trump threatened an additional $US100 billion in tariffs against China.

Global supply chains are at risk from the actions being initiated by Mr Trump and, because of his powerful position and erratic behaviour, no-one knows for sure how this will play out.

Mr Trump’s posturing is damaging to not only global trade. He is facing a backlash from some of his Republican allies, who are now worrying about surviving midterm elections.

The bigger fear over the current conflict is how escalating retaliatory tariffs may undermine institutions such as the World Trade Organisation, which have underpinned the world trading system since the aftermath of World War 2 and have prevented the outbreak of major trade wars.

Reuters:

Trump’s tariffs on Washington’s closest allies also drew condemnation at home from Republican lawmakers and the country’s main business lobbying group and sent a chill through financial markets.

The US markets keep bouncing around:

This year they have been as erratic as Trump, which is no coincidence.

While steel and aluminium tariffs may help protect some US industries they are likely to raise prices on many products that use steel and aluminium.

These particular tariffs aren’t likely to impact greatly on New Zealand, but if it escalates into a wider trade war then we are likely to get tossed around in the storm.

Meanwhile Trump is trying to prop up some big business friends: Trump orders Energy Department to help ailing coal, nuclear plants

U.S. President Donald Trump on Friday directed Energy Secretary Rick Perry to take emergency steps to keep at-risk coal and nuclear plants running, the White House announced.

Under the directive, Perry would require grid operators to buy electricity from ailing nuclear and coal-fired power plants to keep them from being shuttered.

Trump is an erratic interventionist.