Trump’s latest tariff Salvo is all bark and no bite – so far

Cnn
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To hear President Donald Trump tell it, Thursday’s new customs mentioned message was a significant and sweeping order that brings the world to heel. But the plan consisted as it was of a guard formulated memo that offered few specific details and no real -time frame for when they will kick in.

Wall Street, which largely hates customs, responded with relief. The S&P 500 jumped 1%higher, the tech-heavy Nasdaq rose 1.5%and Dow rose 360 ​​points or 0.8%.

Trump started the day by sending on the truth social that Thursday’s announcement was “the big one.” On the campaign track, he promised that America would adopt mutual tariffs that would even score abroad that act unfairly with the United States. Trump has suggested that mutual tariffs could match other countries’ import duties dollar for dollar.

“They charge us a treasure or customs, and we charge them exactly the same,” Trump told journalists on Thursday in the Oval Office.

That’s not what was announced on Thursday. Memorandum Trump signed in the Oval Office ordered state agencies to “work strenuously to counter non-recipheral trade schemes with trading partners by determining the equivalent with a mutual duty with regard to each foreign trading partner.”

In other words: Find out a plan to make trading more just.

It can mean a large number of things, as shown in the White House’s fact sheet on its mutual customs plan, which called a large number of perceived offenses – from Europe’s ban on some seafood import to Brazil’s high ethanol – tariffs. It is not clear how or whether the plan could persuade the countries to buy more US exports or build more factories in the United States, but Trump seemed to think his customs plan would do just that, creating more American jobs.

“If you build here, you have no tariffs at all. And I think that’s what will happen. I think our country will be flooded with jobs, ”the president said on Thursday.

Some economists responded to mutual tariffs with a gap – even before Trump announced his announcement on Thursday. Goldman Sachs analysts said in a note to investors this week that they were skeptical that mutual tariffs would do serious damage to the economy because it still does not export to administer them, and some abroad do not export things that Americans want anyway .

And if adopted, mutual tariffs may take the site of Trump’s much more serious and punishing campaign proposal of a 10% across the customs duty on all goods coming to the United States.

“While a mutual customs policy is at risk, it is also possible that it can gradually reduce the uncertainty of trade policy when it is announced,” Goldman analysts said.

The lack of a strict deadline also leaves behind the possibility of some foreign countries coming to the table to negotiate lower tariffs, and Trump will abolish some or all of his mutual import duties.

“It’s like everything else: He says something with bombast and then calls back,” said Michael Block, market strategist at the third seven capital. “We fear the worst and then realize that it is all part of the art of the agreement.”

Block noted that at the last minute Trump was delaying customs scheduled to come into force earlier this month in Canada and Mexico.

Keith Lerner, CO-chief investment manager at Truist Wealth, said investors suspect that tariffs will again be used as a negotiating chip and may not be as serious or immediate as feared.

“It’s not like tomorrow that we suddenly have 50% duties everywhere,” Lerner said.

When companies, consumers and investors embraced the reality that today’s message was not almost as dramatic as suggested by the hype, they also had to have tariffs had to be adopted one day soon – trade secretary, who nominated Howard Lutnick on Thursday suggested they could come At the beginning of April.

Yes, Trump exposed 25% duty in Mexico and Canada. But he also went through with 10% duty in China, adding more tariffs in his first month in office than throughout his previous period.

This reality can hurt an American economy that is already struggling to fight rising inflation.

“It will be really difficult to fight inflation when we put a great deal of VAT on our imports,” said Christine McDaniel, senior research fellow at George Mason University’s Mercatus Center, a think tank studying markets.

Just the threat of customs can cause uncertainty that depresses business investment and causes the Federal Reserve to further delay the cuts of interest.

“The Trump administration seems to be moving in a ‘mutual’ policy direction despite the significant negative financial consequences for US consumers of overall tariff rates on goods coming into the United States,” Tax Policy Center said in a statement on Thursday.

Trump has made it clear that tariffs remain an important part of his plan to lower inflation and raise revenue to pay for his massive proposed tax cuts. So duty may come. Their scope just remains unclear. And Thursday’s announcement was a lot of bark with a little bite – at least for now.