This is how trade wars escalate: Trump hasn’t even officially announced the steel and aluminum import tariffs, expected to be formally unveiled this coming week, and the rhetoric is already one of World Trade War I doom and gloom.
Hours after Trump tweeted on Friday morning that “trade wars are good, and easy to win,” European Commission President Jean-Claude Juncker said the bloc is prepared to respond quickly and forcefully by targeting imports of Harley-Davidson motorbikes, Levi Strauss & Co. jeans and bourbon whiskey from the U.S.
According to some, the preliminary EU retaliation was targeted in a way that would maximize political pressure on American leaders: Harley-Davidson is based in House Speaker Paul Ryan’s home state of Wisconsin, while bourbon whiskey hails from the state of Senate Majority Leader Mitch McConnell. San Francisco-based Levi Strauss is headquartered in House Minority Leader’s Nancy Pelosi’s district.
As Bloomberg noted, Juncker’s threat heightened the prospects of a global free-for-all, as the World Trade Organization said the potential of escalating tensions “is real” and the International Monetary Fund warned the restrictions would likely damage the U.S. and global economy. It also prompted speculation that in light of the widespread condemnation by US trading partners and allies, that Trump might step back and reconsider the sanctions. This in turn led to a late-day burst in the stock market.
That however appears unlikely: first, in a tweet Friday morning, Trump doubled-down and warned of more trade actions ahead, casting them as reciprocal taxes, a term he has used for imposing levies on imports from countries that charge higher duties on U.S. goods than the U.S. currently charges.
“We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!” Trump said in the tweet.
One look at the record US trade deficit, with both the entire world, and with just Europe, and one could make the case that he is correct.
And then, just to underscore that the market’s late Friday assumption that Trump may change his mind on trade wars may have been woefully premature, on Saturday trump unleashed a pair of tweets making it clear that he not only has no intention of backing down, but is already planning counter-retaliation to Europe’s retaliation.
In the first of two tweets, trump blasted that “the United States has an $800 Billion Dollar Yearly Trade Deficit because of our “very stupid” trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!”