The market is reluctant to fully embrace it but the picture around April 2 tariffs is improving.
Late yesterday, a report from the Toronto Star said Canada would be at the bottom end of tariffs. Mexico is presumably in the same boat, given it's on the same trade agreement. In addition, Trump said this week there has been a lot of progress on fentanyl, which is another good sign.
Today, we got a CNBC report saying that VAT taxes and non-tariff barriers wouldn't be taken into account on tariff rates, or at least not fully taken into account.
Given all this, you can make the argument that tariffs on Mexico and Canada should be near nil. Despite some of the misinformation on the internet, the effective tariff on US goods entering Canada is just 1.1%. Mexico isn't much higher.
What I worry about is that by threatening 25%, Trump is softening up Canada and Mexico for something higher than that. My sense is that he wants a tariff at the highest level he can get away with (in part because he wants to count the revenue in a tax cut). Now that's a calculation that's wrought with pitfalls because any level could invite retaliation.
Does it mean Canada/Mexico would accept 5%? 10%? The Washington Post described Trump's foreign policy doctrine as 'escalate to de-escalate' and that looks like the doctrine on trade as well.
And what about Europe? Tariff rates on US goods are higher but much of that is around autos and Europe has already said it could drop those tariffs. Maybe we start with a higher number and then negotiate in an inverse of what's happened with Mexico/Canada?
I think that would ultimately be good news because much of the US trade or the corporate level is with Mexico/Canada. China meanwhile remains thorny because that's the ultimate target and Trump has teed up some Venezuelan tariffs, which are probably a fresh excuse to tariff China. But surveys have China tariff expectations at 50%, which highlight a heavy dose of fear already priced in.
A final question is around agriculture, which is a thorny issue. The US (and virtually every country) massively subsidizes farmers and protects its local farms. Will the US take that into account or try to lump it all together?
Also see: What's priced in for Trump tariffs
This article was written by Adam Button at www.forexlive.com.Hence then, the article about escalate to de escalate why us tariffs may be lower than feared was published today ( ) and is available on forex live ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
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