The US dollar is decreasing today partly due to a report from the Washington Post which says that Trump is considering putting forward global tariffs but only on 'emergency goods'.
There is a very short list in the report which identifies three areas and 11 specific items:
Defense industry supply chain:
Emergency medical supplies:
- injections
- Needles
- Vials
- Medicinal products
Energy production:
- Batteries
- Rare earth minerals
- Solar panels
That is a very small part of total US global trade and imports. If that is the list, it would not cause a domestic inflation problem and would force the Fed to keep rates higher for longer.
On the weekend, Trump too push one big bill with all its priorities on the border and an extension of the corporate tax cut. He said it would be paid for with tariffs but that this tariff plan would raise very little money, and even global tariffs at high levels would not cover the corporate tax cut.
Regarding the individual tariffs that Trump has threatened on Mexico, Canada and China, the Washington Post writes:
Many business leaders believe the measures are unlikely to ever materialize, but some familiar with the matter said they could be combined with universal tariffs on key sectors.
I think there will be many risks.
But to me, this all looks bearish USD and positive for risk assets, as it seems that the corporate tax cut and not trade or the deficit are Trump's main goals.
