US: Protectionist trade policies may support the USD – Danske Bank

Analysts at Danske Bank note that the Trump has called for renegotiation of the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP).

Key Quotes

“The Transatlantic Trade and Investment Partnership (TTIP) would likely also face an uphill battle under Trump. Restrictions on free trade, e.g. in the form of import tariffs, would tend to be negative for the currencies of the larger trading partners of the US and positive for the USD in the short and medium term.”

“Mexico, Canada and the euro area are more reliant on exports to the US, i.e. the MXN, CAD and to some extent the EUR would likely be harder hit. Note, though, that Trump may have a more positive view on the prospect of a trade agreement between the US and the UK following a withdrawal of the UK’s EU membership. That would tend to be positive for the GBP, as the UK is a net exporter to the US. If Trump tightens restrictions on immigration, this would be negative for potential growth in the US economy. Slower US growth would tend to be negative for the USD.”