In just six hours on Thursday, President TrumpDonald John TrumpDeWine tests negative for coronavirus for second time Several GOP lawmakers express concern over Trump’s executive orders Beirut then tests US aid for a disappointing allyMORE took two main trade actions: restoring aluminum tariffs in Canada and setting restrictions on the use of two main applications based in China.
The moves surprised and alarmed trade observers.
For most of this year, Trump has largely eased the escalating trade wars that marked much of his presidency in 201
“This recent outburst reflects the decision of the Trump re-election team that they need some very clear messages to have a chance to win,” said Gary Hoofbauer, a trade expert at the Peterson Institute for International Economics in Washington.
“It will be an ongoing and escalating drama until the election and maybe until January 20,” he added.
Trump, who rode a wave of trade antipathy to the White House in 2016, appears to have turned a corner over the past year, from the finalization of the US-Canada Agreement in Mexico to the signing of the Phase I agreement with China in January.
But with polls showing he is lagging behind the supposed Democratic nominee Joe BidenJoe Biden Biden says Trump’s executive order is a “reckless war on social security” Trump enters test test with top GOP donor Adelson: Blumenthal report calls for declassification of materials detailing Russian threat to US elections MORE nationally and in key bitcoin countries, Trump has boosted trade again.
Speaking at a Whirlpool factory in Ohio on Thursday, he announced the re-installation of tariff for aluminum of Canada.
“A few months ago, my administration agreed to raise these tariffs in exchange for a promise from the Canadian government that its aluminum industry would not flood our country with exports and kill all of our aluminum jobs. That’s exactly what it did,” Trump said.
Hufbauer characterizes Trump’s move as a political creation more than providing economic benefits to the United States
“The aluminum tariff is not supported by the US business community, including aluminum producers,” Hoofbauer said.
Canada has responded quickly to Trump’s announcement by imposing its own counter-tariffs on US aluminum products.
More ominously, Trump pointed out that there was something bigger at work.
“I will sign something that is very important next week, probably. And that will have a huge impact on justice and trade, “he said on Thursday.
On the same day, he announced executive orders that would essentially ban China-based TikTok and WeChat applications in late September, part of a series of escalations with China involving the Secretary of State. Mike PompeoMichael (Mike) Richard PompeoBeirut then tests US aid for a disappointing ally Advocacy groups go against Trump to elect ambassador to Germany US promises millions for disasters in LebanonMORE officially rejects Beijing’s claims to the South China Sea.
“This action was not divorced by the trade war at all,” said Peter Cecini, founder of AlphaOmega Advisors, referring to Pompeo.
The South China Sea, Cecini noted, is a major shipping route.
Trump’s directing of Canada and China in quick succession has drawn some criticism of Capitol Hill, especially since Canada is seen as a trusted ally and neighbor.
“President Trump has the right to continue to clash with China over his unfair trade practices,” said the chairman of the Senate Finance Committee. Chuck GrassleyCharles (Chuck) Ernest GrassleyMcConnell goes hand in hand with coronavirus to relieve GOP presidents Presidents return on charges of spreading misinformation with Biden probe about money: Unemployment debate splits GOP divisions | The pandemic reveals shortcomings in unemployment insurance programs The survey found that almost a third of reassigned workers were laid off again MORE (R-Iowa) said. “The administration must also work with Canada to focus on ending trade abuses in China.”
Chairman of the Committee on Home Roads and Means Richard NealRichard Edmund NeilBayden says Trump’s executive order is a “reckless war on social security” after Trump tweeted MORE (D-Mass.) He was more critical.
“The president has consistently replaced America’s workers and industry with his gambling and half-baked policies,” he said. “This is just another example.”
Tori Smith, a trade expert with the Conservative Heritage Foundation, said the new trade barriers would only undermine economic recovery.
“This makes it very clear that the administration does not really prioritize the trade strategy for growth,” she said.
What Trump is doing next has observers of trade and markets.
One of the potential steps involves completely eliminating the first-phase deal and raising tariffs for China. Since the coronavirus pandemic was introduced, Trump has repeatedly said he is “torn” over whether to keep the deal alive.
Another possible option would be the unprecedented use of the International Emergency Economic Force (IEEPA) law to impose tariffs under the guise of an emergency. Last year, Trump threatened to use these forces against Mexico for illegal immigration, but later backed down.
IEEPA was the basis for Trump’s executive orders for TikTok and WeChat.
A significant escalation of any trade dispute could put markets back in the queue and undermine troubled businesses less than three months before the election.
But Cecini believes markets are more concerned about the immediate problems and that wider damage to consumers and the economy is likely to go even further.
“Currently, people are blinded by other things, the recovery of the pandemic and the fiscal response to it,” he said.
“So over time, that’s going to matter – it’s going to be the biggest risk to the market – people are focused on other things right now.”