Tags: fed | kaplan | trump | tariffs | mexico | canada

Fed's Kaplan: Tariffs May Have 'Chilling Effect' on Mexico, Canada

(Yong-hian-Lim/Dreamstime)

By    |   Tuesday, 06 March 2018 10:27 AM

Dallas Fed President Robert Kaplan warns that President Trump's plans to slap tariffs on imported steel and aluminum "could have some chilling effect" on trade relations with Mexico and Canada.

"It's so clearly in the interests of the United States to have strong trading relationships with both those countries. I'd be optimistic about how this actually gets implemented," Kaplan told CNBC.

He also told CNBC that he supports three rate hikes this year, a sentiment reflected in markets.

"It's three for this year. I think we should get started sooner rather than later, though," he said during an interview on CNBC's "Squawk Box."

Kaplan explains that consistent hikes are necessary especially with the unemployment rate at 4.1 percent, which he and other Fed officials consider to be right around full employment, CNBC explained.

"We think the unemployment rate is going into the 3s during 2018. ... We are either at or below full employment right now," he said. "On the bright side, it means more people will have jobs. It should lead to some pressure."

"But the thing I'll be watching is the history of overshooting full employment in the United States and having a soft landing is not a long history. So the reason I want to start removing accommodation, raising the fed funds rate, is I think that will give us the best chance to extend this expansion for longer."

Trump faced growing pressure on Monday from political and diplomatic allies as well as U.S. companies urging him to pull back from proposed steel and aluminum tariffs, although he said he would stick to his guns.

Inside the White House, there still appeared to be confusion about the timing and extent of the planned tariffs, which would hit allies like Canada and Mexico hard, Reuters explained.

Efforts by Trump and U.S. trade negotiators to link the NAFTA trade pact talks to the duties received short shrift from Ottawa and Mexico City.

Leading Republicans turned up the pressure on Trump, with House of Representatives Speaker Paul Ryan leading the charge. Ryan’s home state of Wisconsin would be hit by proposed European counter-measures on Harley-Davidson Inc motorbikes.

Representative Kevin Brady, another top House Republican, called on Trump not to hit America’s closest allies.

Business leaders are pressing for a meeting with Trump to brief him on the negative repercussions of the tariffs on companies that use steel and aluminum, a source familiar with the matter said.

A meeting had not yet been set up, the source said. The White House had no comment.

The planned tariffs have roiled world stock markets as investors worried about the prospect of an escalating trade war that would derail global economic growth. Stocks across the globe rose on Monday, however, after four days in decline as investors saw the tariff threats as a U.S. negotiating tactic and not a done deal and as pressure grew on Trump to back off.

“We’re not backing down,” Trump said during a White House meeting with Israeli Prime Minister Benjamin Netanyahu. “I don’t think you’re going to have a trade war,” he added, without elaborating.

For his part, Trump also has taken to Twitter.

"To protect our Country we must protect American Steel! #AMERICA FIRST" he tweeted.

He later followed that with

"...treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying."

(Newsmax wire services contributed to this report).

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Economy
Dallas Fed President Robert Kaplan warns that President Trump's plans to slap tariffs on imported steel and aluminum "could have some chilling effect" on trade relations with Mexico and Canada.
fed, kaplan, trump, tariffs, mexico, canada
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2018-27-06
Tuesday, 06 March 2018 10:27 AM
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