US: It’s all about Trump today – Rabobank

According to ‘people familiar with the matter’, President Trump is expected to announce tariffs on steel and aluminium today, points out the research team at Rabobank.

Key Quotes

“The President has told his aides that he is looking for import duties of 25% on steel and 10% on aluminium, and while these measures are mainly a response to China’s steel industry, Trump has indicated that he will not limit the tariff to specific countries.”

“These plans are not final, and details –or, indeed, even the announcement date– may still change. However, tariffs on aluminium and steel imports have been on the cards since mid-February, when a report from the US Commerce Department recommended restricting the reliance of imports as a matter of national security (an argument that was, by the way, rebuked by the Department of Defence). Such a conclusion would indeed give the US greater powers to curb steel and aluminium trade through tariffs, but it doesn’t take away from concerns that this is simply driven by Trump’s protectionist agenda; the same Commerce Department report also notes that “[steel] imports are nearly four times our exports. Six basic oxygen furnaces and four electric furnaces have closed since 2000 and employment has dropped by 35% since 1998.” – it doesn’t take much imagination to picture Trump shouting “Jobs, Jobs, Jobs!”.”

“If these tariffs are imposed, it could provoke China and possibly also deteriorate trade and diplomatic relationships with the US’ allies. The (expected) tariffs may have had some impact on the Chinese economy already: the PMI for the Chinese steel industry fell to a contractionary 49.5 reading, with new export orders weakening again. Again, while some effects from the Lunar New Year cannot be ruled out, the decline in export orders is notable given this backdrop of looming US tariffs. Markets will certainly be eyeing any announcement from the White House and –perhaps more importantly– will anxiously await whether, and how, China responds. Retaliation by the Asian Dragon could quickly see things spiral into a trade war, or at the very least increase market concerns of one.”