Blog Does steel matter more than China and porcelain napkin rings?

Posted by: Paul Donovan

06 Dec 2019
  • US President Trump has been tweeting on trade again. There was the normal noise over China. Novelty came with threatened trade taxes on French goods, and re-imposed trade taxes on Argentina and Brazilian steel.
  • France's digital tax led Trump to threaten to tax US consumers of French goods. The list includes yoghurt; porcelain napkin rings; champagne; and Gouda and Edam cheeses. Gouda and Edam are Dutch cheeses, which France does not export. Trump's political supporters may not care much about paying a 100% tax on porcelain napkin rings and champagne.
  • The threat of anti-French taxes broadens the trade conflict. The threat may force a European response. However, the re-imposition of steel taxes may do more global damage.
  • The trade conflict's big cost is the collapse of trust in trade. Firms are reluctant to invest in global supply chains if they cannot trust the trade "rules of the game". Lower global investment slowed the global economy in 2019. Argentina and Brazil had agreed to limit steel exports to the US. Trade taxes were waived in exchange. Re-imposing these trade taxes makes clear that trade deals may not last. For any firm thinking about a long term investment, that is a problem.

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