After Trump imposed 25% tariffs on steel and aluminum exports from the EU to the US amounting to some $28 billion, the former retaliated with tariffs of comparable size, at roughly €26 billion. They haven't decided on the full list of products that will have more tariffs added, but they said they are open to negotiation and would rather drop them altogether than engage in a trade war.
The same kind of action-reaction happened in Trump's first term, but with lower amounts being thrown around, twice, in 2018 and in 2020.
It is worth mentioning that Trump's tariffs were imposed on raw materials, not on products with high added value, but raw materials that the US companies could probably get from elsewhere at a comparative or lower price, after the 25% tariffs is imposed on EU exporters, probably mainly ArcelorMittal (based in Luxembourg, but a global player), which is ranked 2nd in the world in the steel production after a Chinese company.
The EU is very big on recycling, so they might have significant amounts of aluminum and steel from that source. I just learned from Grok that 30% from the aluminum and steel in circulation in the world comes from recycling, not from primary ores that are processed.
That's a damn good image the AI created on trade war between countries!
On the trade war topic, I missed the retaliation of tariffs from China after the US increased their tariffs on Chinese exports to 20%. But after looking into it, it seems they raised their tariffs against US exports to 15%, mainly "agricultural products such as chicken, wheat, corn, cotton, soybeans, pork, beef, and dairy products". They just came in effect on March 10th, by the way, about a month after the US increased their tariffs.
Tariffs as a Way to Force Fed to Cut Rates?
From what I read, Trump wants Fed to cut rates and Powell doesn't want to (or not as quickly). I've heard the theory that Trump uses tariffs as a way to force Fed to cut rates.
The theory says that if the economy slows down (which would be an effect of a trade war), Fed would be forced to cut rates, to speed it up again, by allowing access to cheaper credit. If that happens, it would be a positive outcome for risk-on assets, which include crypto.
However, Trump seems a too bigger fan of tariffs to be his own objective. I can see a couple of other targets he could follow, but he might destroy the global (and American) economy in the process. Who really knows? These are complicated mechanisms to gamble with...
Anyway, on using tariffs as means to force Fed to lower rates, maybe, but he was a fan of them in his first term too, when the Fed rate was pretty low and only started to go up in the second part of his term.
Posted Using INLEO