US: Trump’s trade progression steps remains unclear - Nomura

Research Team at Nomura, notes that Trump has said repeatedly, and forcefully, that he wants to negotiate better trade deals and he is willing to impose significant new barriers to trade in order to advance that objective and while his rhetoric during the campaign was quite aggressive, the progression of steps he intends to take remains unclear.

Key Quotes

“Wilbur Ross, Trump’s choice for Secretary of Commerce, has said that tariffs should be used as a last resort. However, recent press reports suggest that Trump is considering using executive authority to impose a temporary 5-10% across-the-board tariff. Note that the House tax plan includes “border adjustments” – comparable to those used in countries that impose a valued-added tax – that would, in important respects, be comparable to new tariffs. At this point we just don’t know exactly how Trump plans to proceed in this area.”

“Trump and his advisers may also take a different attitude to exchange rates. For the last two decades the US government, under both Republicans and Democrats, has largely had a laissez faire attitude to exchange rates. During the campaign, however, Mr Trump emphasized the role of exchange rates in driving the US trade deficit. This may suggest that he is likely to take a more aggressive stance with other countries that implement policies that hold down their exchange rates.”