US: ‘Mercantilist and Mercurial’ back to weigh on USD - ING

President Trump is reportedly set to announce a 25% tariff on US steel imports today (and also possibly a 10% tariff on aluminium imports) – which arguably would be the most globally controversial protectionist measure the President has put in place since taking office, according to Viraj Patel, Research Analyst at ING.

Key Quotes

“While the effects may initially be contained within commodity markets, the key for broader global markets is how the rest of the world – namely China – reacts to the US administration’s ‘America First’ protectionist policies. Indeed, we have felt that investors in recent weeks may have been viewing the risks around US trade policy with rose-tinted glasses – and today’s expected announcement by the President could test some of the more recent assumptions that have been embedded into global asset prices. One of those assumptions is the strength of the global economy – and certainly the prospect of a ‘global trade war’ and heightened geopolitical tensions could temper some of the optimism and see greater two-way risks to global growth.”

“As for the dollar, history shows that a more protectionist US trade policy stance does not bode well for currency – especially given the Trump administration’s new ‘Mercantilist and Mercurial’ dollar policy. With heightened US protectionist noise, the risks are a return of a ‘Sell America’ theme being expressed in global markets – akin to what we saw in the early 90s under a Clinton administration.”