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Trump’s tariff war: What should traders expect next?

Trump’s tariff war: What should traders expect next?

It is looking increasingly likely the Trump administration has entered the White House with a detailed economic game plan. Some of this was signalled on the campaign trail last year, but was largely disregarded by the market. Team Trump this time around sounds more like a corporation than a national government, and is negotiating like one.

The current round of tariff announcements is increasingly being viewed as the opening gambit in a new series of trade negotiations with America's main trading partners, as Trump looks to address some of the issues that the US economy is still grappling with. It may upset some of America's closest allies, but his intention seems to be, as it says on the hats, to make America great again.

This is not business as usual

While markets are looking a little calmer on Wednesday, "the proverbial tariff can has just been kicked down the road," according to one analyst we spoke to this morning. Trump's proposed tariffs on Canada and Mexico, while postponed ahead of talks, are still on the table. There is also a full review of US trade policy which the President has ordered and which is due to report back in April.

The problem for US stocks is that not only US tariffs but the response of trading partners could harm big American businesses, which have grown up relying on a relatively benign international trading environment in the last 25 years. These are companies that rely on access to foreign markets, but those markets could be about to get a lot more expensive to sell into. Don't forget a punchy one third of the revenues for S&P 500 companies come from foreign sources.


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