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White House Staffers Seek to Talk Trump Out of Tariffs

White House Staffers Seek to Talk Trump Out of Tariffs
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Tuesday, 06 March 2018 08:03 AM Current | Bio | Archive

For the moment, it looks as if financial markets have reassessed the idea of a global trade war and have downgraded the risk to that of a global trade skirmish with an overlay of rhetoric on the Trump Twitter feed.

News that White House West Wing aides led by National Economic Council Director Gary Cohn, are planning a White House meeting for Thursday with executives from industries likely to be hurt by big tariffs on imported steel and aluminum has provided a degree of reassurance that the case against raising U.S. consumers taxes will be one of the last things President Trump hears before coming to a decision on the details.

There has been a growing sense among some administration officials that the best way to talk President Trump out of the tariffs was to make sure he hears from people outside of the White House, since he’s ignoring advisers inside the building.

The meeting is meant to counter the session with steel and aluminum industry executives last week in which Trump stunned the world by announcing he would slap tariffs of 25 percent on imported steel and 10 percent on imported aluminum.

On Monday, House Speaker Paul Ryan and other Republican allies of President Donald Trump pleaded with him to back away from his threatened international tariffs, which they fear could spark a dangerous trade war. Trump retorted: "We're not backing down."

In The New York Times we read that the President said U.S. neighbors Canada and Mexico would not be spared from his plans for special import taxes on steel and aluminum, but that he held out the possibility of later exempting the longstanding friends if they agree to better terms for the U.S. in talks aimed at revising the North American Free Trade Agreement (NAFTA). "We've had a very bad deal with Mexico; we've had a very bad deal with Canada. It's called NAFTA," he declared.

By the way, Canada is the United States' No. 1 foreign supplier of both steel and aluminum. Mexico is the No. 4 supplier of steel and No. 7 for aluminum.

Congressional Republicans say any tariffs should be narrow in scope, and they privately warned that Trump's effort could hurt the party's hopes to preserve its majority in the fall elections.

The tariffs will be made official in the next two weeks, a White House officials said.

Nevertheless, the rhetoric between Congressional Republicans and the President remains heated while President Trump is certainly not backing down from the broad concept of a tax increase.

However, the probability of a full-scale trade war should probably still be assessed by investors as being relatively low, of course, in the absence of any further aggressive measures.

Over in Italy, in the meantime politics have settled into a period of uncertainty, which is of course not entirely shocking in Italy. Interestingly, the exit polls appear to have done a reasonable job of predicting the general election outcome this time around.

The process of negotiations to form a government is going to take some time.

However, Italy has often had periods of care taking government in the past and the country simply continues to function during such periods.

This time around, Italy has voted for its 62nd government since World War II.

Besides all that, in the U.S. we will get the durable goods and capital spending data today. These data are too soon and too volatile to really show whether there has been a significant increase in capital spending by U.S. companies in the wake of the tax breaks. The data relate to January.

Companies do have a political incentive to spin the presentation of their capital spending plans as being tax cut related, but the evidence from listed companies, so far, is that there is a distinct bias in favor of share-buybacks and dividends, which are reaching record levels.

The actions of the small and median size business sector may be different again, however.

The issues of capital spending are further complicated by the oil industry, which has been relatively capital spending intensive, but also by structural changes, which means that companies have been able to proportionately cut spending on computer equipment and software, even as e-commerce has grown exponentially.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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There has been a growing sense among some administration officials that the best way to talk President Trump out of the tariffs was to make sure he hears from people outside of the White House, since he’s ignoring advisers inside the building.
white house, trump, tariffs, investors
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2018-03-06
Tuesday, 06 March 2018 08:03 AM
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