The Trade War Starts on Monday
Author: Greg Valliere
January 17, 2025
DONALD TRUMP HAS BEEN TELLING ADVISERS for weeks that he wants bombshells right after he’s inaugurated next Monday, and he’ll get plenty.
SOURCES TELL US that Trump will unveil “dozens” of new regulations — while killing a wide range of existing regulations covering energy, financial services, health care, etc.
MANY OF THESE PROPOSALS will face litigation from Democrats, but many can take effect immediately.
TRUMP IS A MASTER NEGOTIATOR, and it’s possible that he will water down a tariff war and specific action aimed at China, Canada, Panama, Mexico and Greenland, which is owned by Denmark.
TRUMP HAS TWO MAJOR REASONS to maintain an aggressive stance. First, he will use tariffs as a club to get countries to change policies on issues like fentanyl smuggling. Second, he wants the U.S. to get more revenue from trading partners.
COULD TRUMP SOFTEN his demands for higher payments from countries like Panama? Yes, he could still declare victory. But we don’t buy a scenario that waters down his demands right away.
Here’s our take on the status of trade disputes:
CHINA FACES an aggressive new round of tariffs; Canada is headed to much higher tariffs; Panama will threaten military retaliation if Trump seeks to reclaim the Canal; and Greenland, intriguingly, will listen to offers.
THE RISK IS TWOFOLD as a trade war looms. First, it will invite retaliation — Canada is compiling an extensive list of products that face retaliation. Second, there’s a clear threat of inflation.
TRUMP IS CONVINCED that U.S. trading partners have been taking advantage of America — and he wants the revenues that new tariffs will bring. Is he bluffing? We don’t think so.
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