logo
Trump's America First Trade Policy: Tariff Risks Are Rising

Trump's America First Trade Policy: Tariff Risks Are Rising

Yahoo05-02-2025

American President Donald J. Trump loves tariffs, and that's an indication that they're not going away anytime soon.
As Trump tries to upend the U.S. trade deficit, tariffs have become his go-to tool to bend foreign governments to his will. For Trump, it's his presidential version of 'The Art of the Deal.' He's already imposed a 25 percent tax on imports from Mexico and 25 percent on select items from Canada to curtail illegal migrants and drugs from crossing U.S. borders. The two reacted with retaliatory tariffs of their own, although all are currently on 'pause' following preliminary concessions as the North American trading partners try to find a more permanent resolution to avoid a trade war.
More from Sourcing Journal
Panama Reportedly Rethinking Deal with Canal-Adjacent Port Operator
E-Comm Escalation? USPS Quickly Reverses Suspension of Service From China
Following Trump Edict, China Hits Back With Tariffs of Its Own
The 30-day delay continues until March 4. 'We think a further extension is likely, but the tariff risk for both countries is likely to remain until at least the conclusion of the USMCA review slated for mid-2026' concluded economists at Goldman Sachs.
The USMCA is the U.S.-Mexico-Canada Agreement to Buy America, which replaced the North American Free Trade Agreement that Trump signed during his first term as president. The agreement is up for review in 2026.
As for the Goldman economists' expectation that there could be a further delay on the start of Mexican and Canadian tariffs, that's always a possibility. And all the more likely if talks result in some concession that Trump can claim as a big 'win.'
The Goldman economists also believe that a tariff on 'critical imports' is an increasing risk. That would include oil/gas, industrial metals, pharmaceuticals, semiconductors and other electronics, as well as critical minerals, totaling around $600 billion in total imports. And they see a broad tariff on the European Union and a universal tariff as 'clear risks.'
The additional 10 percent tariffs imposed on China began on Tuesday. China retaliated with its own set of tariffs on American exports to China. It also placed export restrictions on critical minerals to the U.S.
Telsey Advisory Group's chief investment officer Dana Telsey said on Wednesday that the announced tariffs on Canada, Mexico, and China together could result in a 'tax' burden to the average consumer in the range of $830 in 2025, citing to a Jan. 31, 2025, analysis by the TaxFoundation.org. But she also noted that the projection did not include the impact of retaliatory tariffs.
'President Trump included in the executive order on tariffs the ability for the U.S. to increase the tariffs on Canada, Mexico, and China if retaliatory tariffs are imposed on the U.S.,' she said.
How high can tariffs go?
The Goldman economists believe the risks have 'tilted toward higher' tariffs than they had previously assumed. 'The challenge is that creating uncertainty is likely part of President Trump's strategy,' they concluded in an economic research note on Tuesday.
But using tariffs as a tool to extract foreign government concessions as Trump pushes forth on his trade deficit goals—which are part of his 'America First Trade Policy'—also means more duties are on the horizon.
Trump has said that America has trade deficits with almost every country, and he wants to right what he sees as a wrong. That's where a universal tariff could come into play. Or in the case of the digital services tax (DST), Trump could play hardball by slapping reciprocal tariffs if he doesn't get the concessions that he wants.
Morgan Stanley's U.S. public policy strategists Ariana Salvatore and Michael D. Zezas on Wednesday said they believe Trump will levy more tariffs on China later this year as part of a larger trade policy goal. They also didn't rule out the possibility of a more aggressive path on the overall tariff front if the Trump administration's motives are due to trade deficit concerns more than policy concessions. The strategists also noted public comments by Trump on Friday when he said he did not see border concessions as sufficient because the goods trade deficit would persist. And if cutting the trade deficit is the ultimate goal, tariffs could be used for a considerable time in an effort to incentivize more domestic production, Salvatore and Zezas concluded.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

The latest CPI report showed some softening in inflation. What investors are saying
The latest CPI report showed some softening in inflation. What investors are saying

CNBC

time8 minutes ago

  • CNBC

The latest CPI report showed some softening in inflation. What investors are saying

Wall Street got a favorable inflation report on Wednesday, giving equities a boost. The consumer price index rose 0.1% in May , slightly less than the 0.2% increase economists polled by Dow Jones anticipated. So-called core CPI, which strips out volatile food and energy prices, increased by 0.1% — also less than expected. Stocks reacted positively, with S & P 500 futures erasing an earlier decline to trade about 0.2% higher. Some investors noted continued uncertainty around the Federal Reserve's interest rate outlook, despite the latest price report. Here's how some investors, economists and strategists reacted to the news: Chris Rupkey, chief economist at FWDBonds: "Net, net, the inflation shock wave from more costly imported goods has yet to arrive on American shores. Today's consumer inflation report is a real head-scratcher for economists as they ponder why the trade war hasn't set off another inflation outbreak yet with core goods prices sitting on store shelves seeing no change in May." Alexandra Wilson-Elizondo, global co-CIO of multi-asset Solutions at Goldman Sachs Asset Management: "Inflation in May was lower than anticipated, suggesting the tariffs aren't having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand. While we might see some price increases on goods later, service prices are expected to remain stable, suggesting any rise in inflation is likely to be temporary." Ian Lyngen, head of U.S. rates at BMO Capital Markets: "CPI surprised on the downside across the board. … The yield curve is bull steepening as the slower trajectory of inflation has firmed rate cut expectations for later this year. On the margin, it is also supportive of next week's [Federal Reserve Summary of Economic Projections] signaling 50 bp of cuts in 2025." Ryan Weldon, investor director and portfolio manager at IFM Investments: "The softer services inflation lends itself to a slowing economy in the face of continued tariff anxiety and will support the Fed to come out of their wait-and-hold approach sooner. However, the Fed will still want to see several months of consistent inflation and jobs data and have more clarity on the Trump administration's tariff policy before resuming cuts." Chris Zaccarelli, chief investment officer at Northlight Asset Management: "With lower-than-expected numbers across the board (with the exception of headline YoY, which stayed constant), and a trade deal with China that was agreed to in London, the narrative around tariff-induced inflation should subside. However, CPI remains above 2% and even though the tariff rates are going to be less than originally feared, after they are implemented they will further increase the cost of goods." Skyler Weinand, chief investment officer at Regan Capital: "Wednesday's weaker-than-expected CPI opens the door to a Fed rate cut in September, since it's clear that the inflation data continues to move in the right direction even as we deal with tariff uncertainty. While employment is strong and the economic effects from tariffs are yet to be determined, the Fed would like to start easing again in the not too distant future to get in front of a possible recession in 2026" Peter Boockvar, chief investment officer at Bleakley Financial Group: "Bottom line, a sigh of relief on the lower than expected inflation stats just as we search for where tariffs will work its way through the supply chain and end customer."

US and China ‘back to square one' after two days of trade talks
US and China ‘back to square one' after two days of trade talks

Yahoo

time8 minutes ago

  • Yahoo

US and China ‘back to square one' after two days of trade talks

Talks between the US and China are 'back to square one' after two days of trade negotiations in London failed to secure a major deal. Howard Lutnick, Donald Trump's commerce secretary, said the two sides had agreed on a 'framework' to put their trading relations back on track and repair the truce initially agreed in Geneva last month. There was little market reaction to the announcement at Lancaster House shortly after midnight, with the dollar strengthening a little and stock markets opening marginally higher. The two sides have until Aug 10 to negotiate a more comprehensive agreement to ease trade tensions, or US tariffs on China will snap back from about 30pc to 145pc, with China's levies on America increasing from 10pc to 125pc. Josh Lipsky, of the Atlantic Council's GeoEconomics Center in Washington, said: 'They are back to square one but that's much better than square zero.' Jim Reid, a Deutsche Bank analyst, added: 'While the mood music has stayed positive, investors may be wary of the pattern that emerged during the previous US-China trade talks in 2018-19, when apparently constructive in-person meetings seemed to take a step back as the negotiating teams returned to their capitals. 'So there's perhaps a little disappointment this morning that we haven't yet got a bigger announcement, even though there's time to hear the full conclusions of the meeting.' Senior officials from Washington and Beijing had gathered in London after accusations from both sides that they had violated the terms of the deal made in Switzerland. Mr Trump and Xi Jinping held a call last week that Mr Lutnick said 'gave the fundamental foundation on which we were able to reach agreement'. Mr Lutnick said: 'We have reached a framework to implement the Geneva consensus and the call between the two presidents. 'The idea is we're going to go back and speak to President Trump and make sure he approves it. 'They're going to go back and speak to President Xi and make sure he approves it, and if that is approved, we will then implement the framework.' In a separate briefing, Li Chenggang, China's vice commerce minister, said a trade framework had been reached in principle that would be taken back to US and Chinese leaders. Mr Lutnick said China's restrictions on exports of rare earth minerals and magnets to the US would be resolved as a 'fundamental' part of the framework agreement. He also said the agreement would remove some of the recent US export restrictions, but did not provide details. Kathleen Brooks, the research director at XTB, a trading platform, said: 'Overall, the US-China trade agreement is taking its time, and it could test the market's patience.' Meanwhile, the European Union reportedly believes it could extend its trade negotiations with the US beyond the initial deadline next month. The EU thinks there could be scope for further talks if it agrees a deal in principle by July 9, which is considered its best-case scenario, according to Bloomberg. The Trump administration is scheduled to enforce 50pc tariffs on EU goods beyond that date unless a deal is reached. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.

Inflation holds steady as data shows how prices are faring after Trump's ‘Liberation Day' tariffs
Inflation holds steady as data shows how prices are faring after Trump's ‘Liberation Day' tariffs

Yahoo

time9 minutes ago

  • Yahoo

Inflation holds steady as data shows how prices are faring after Trump's ‘Liberation Day' tariffs

Inflation held steady last month, according to data that gives the first glimpse of how prices are faring since President Donald Trump's sweeping 'Liberation Day' tariffs. Consumer prices rose 0.1 percent on a monthly basis in May, while annual inflation stood at 2.4 percent, according to the Department of Labor's consumer price index. The report captures the period after Trump unveiled his global reciprocal tariffs in April and provides some insight as to whether businesses are bearing the brunt of the duties themselves or passing them on to customers. Analysts predicted to see a bigger increase, but some still warn the future is uncertain because tariffs keep changing. 'So far, inflation risks from higher tariffs are subdued,' Win Thin, global head of markets strategy at Brown Brothers Harriman, told Bloomberg. 'Nonetheless, US protectionist trade policy and uncertainty about the ultimate level of tariffs are downside risks to growth and upside risk to inflation. Bottom line: the fundamental USD downtrend is intact.' Since Trump announced his global reciprocal tariffs and the stock market was spooked, many of the duties were paused. However, 10 percent tariffs for most countries remain. Inflation has been slow to respond to the tariffs as most retailers are selling merchandise accumulated before the import duties took effect. Economists said that the reduction in the scale of some trade tariffs may have 'helped to restrain cost increases thus far,' Wells Fargo's Sarah House and Nicole Cervi said. 'That said, as the higher tariff regime persists, shielding consumers from the costs is likely to become more challenging,' the economists added. 'Only a few goods prices likely rose as a result of the new tariffs in May,' Pantheon Macroeconomics economists Samuel Tombs and Oliver Allen said in a note, Bloomberg reports. 'June will be a different story — while some providers of discretionary services probably cut prices or kept them low to sustain demand.' Walmart warned customers last month that they could see price rises because of the trade tariffs. The retailer's chief financial officer John David Rainey said that the tariffs are 'still too high.' 'It's more than any supplier can absorb. And so I'm concerned that consumer is going to start seeing higher prices,' he said. 'You'll begin to see that, likely towards the tail end of this month, and then certainly much more in June.' Reuters contributed reporting

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store