Trump signs tariff order – NK/U.S. meeting planned
So Trump’s tariff move went ahead as planned yesterday. The policy will boost support within his base but has drawn widespread condemnation from governments across the world. Under the recommendation of the Secretary of Commerce Wilbur Ross, Trump signed Presidential orders imposing a 25 percent tariff on steel and 10 percent on aluminium imported from all countries except Canada and Mexico, which will come into effect within 15 days.
The argument in favor of tariffs from Trump’s staff was based on addressing unfair ‘dumping’ of foreign steel on its market, which has undermined American manufacturers, but is also based on national security reasons, those being that in the event of an armed conflict with a foreign power, the United States may be unable to meet the internal demand for steel and aluminium it needed to manufacture its own military equipment including vehicles, because its steel and aluminium industries have been so battered by foreign imports.
The Presidential proclamation reads: “The Secretary found and advised me of his opinion that steel articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States. The Secretary found that the present quantities of steel articles imports and the circumstances of global excess capacity for producing steel are “weakening our internal economy,” resulting in the persistent threat of further closures of domestic steel production facilities and the shrinking [of our] ability to meet national security production requirements in a national emergency.”
The market reaction to the news in Asia has been fairly tepid though, with key indices rising, because the trade action was offset by news that Trump had accepted an invitation from Pyongyang to meet DPRK leader Kim Jong Un as early as May, an unprecedented development in relations between the two nations.
European stocks were more mixed today as investors looked more absorbed by the tariff decree and release of U.S. labor market data (non-farm payrolls) later which could help set the tone for Federal Reserve policy. German stocks are currently the weakest in Europe because new data showed exports dropped at the start of 2018.
The German government today urged for multilateral talks to address overcapacity in the steel sector and said it supports the European Union’s plans to retaliate to Trump’s tariffs. From an investor perspective, keep in mind this action from the U.S. could boost American steel stocks like Nucor and United States Steel in the long run.
This policy may not last forever though. The Presidential proclamation reads: “Should the United States and any such country arrive at a satisfactory alternative means to address the threat to the national security such that I determine that imports from that country no longer threaten to impair the national security, I may remove or modify the restriction on steel articles imports from that country and, if necessary, make any corresponding adjustments to the tariff as it applies to other countries as our national security interests require.”
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