Putting paid to the Trump put
Let's try some bad geoeconomics instead!
President Trump proceeded with his 25% steel and aluminium tariffs this week, prompting immediate retaliation from the EU and Canada. The EU hit USD 28 billion of US exports from April, leaving some time to negotiate with Washington. Canada announced tariffs on USD 21 billion of US exports.
The Tax Foundation is doing a great job tracking tariff developments in real-time, including estimates of the average US tariff rate. At 8.4%, the average tariff rate is the highest since 1946, the year before the US joined 23 other countries in signing the General Agreement on Tariffs and Trade in 1947. Trump has binned nearly eight decades of global trade liberalisation efforts in less than two months.
Market reaction has been predictably bad and provides the best real-time guide to the likely macroeconomic implications, although sentiment surveys are also reflecting the record levels of economic and trade policy uncertainty. A poll of more than 220 US CEOs found business confidence at its lowest level since November 2012, with CEOs’ rating of current business conditions at the lowest level since the pandemic in 2020. The Trump trade is now running in reverse, with US equities underpeforming their global peers.