Trump and Trade - Nomura

Analysts at Nomura explained that Trump has made numerous statements suggesting that he wants to reverse the long-term trend towards a more open, globalized US economy.

Key Quotes:

"Those statements, some of which have been directed at individual companies, may already be affecting business decisions. The President has considerable latitude to impose new impediments to US imports. The new barriers to trade may, or may not involve tariffs and we are not assuming a “trade war” in our outlook.

Nonetheless, there is heightened risk that the new administration will imposes material obstacles to imports and that US trading partners will impose significant barriers to US exports in response. These actions could have significant effects on the US economy.

For example, if increased barriers to imports raise import prices by 5% then we expect core prices to increase by 0.6%.

One reason for the high import price transmission is that the US is heavily dependent on imports for consumer goods: in 2015, the US ran a $399.4bn trade deficit in consumer goods, excluding automotive and food. It would not be easy for the FOMC to ignore such an increase in core inflation."