President Donald Trump
Rather, analysts worry that the response from U.S. trading partners could be major.
“The big issue there is if there’s retaliatory tariffs … that would become a big issue if that happens,” Jim Paulsen, chief investment strategist at Leuthold Group, said in a phone interview. “If a lot of countries got involved, it’s a dangerous slope that [Trump is] playing here.”
Goldman Sachs said in a note to clients that the tariffs, if finalized as currently proposed, would be “the most substantial trade restriction the Administration has announced to date.”
While much of Trump’s rhetoric on “unfair” trade deals has been directed at China, much of the steel and aluminum imported to the United States actually comes from Canada, Mexico and other countries in the Americas. U.S. trading partners have already started to respond.
Canadian Trade Minister François-Philippe Champagne called the tariff proposal “unacceptable,” with the German Steel Association saying that the proposal would violate World Trade Organization rules.
The European Union announced it would react firmly and
“This is the risk – that you impose these measures and then other countries respond,” Michael Gapen, chief U.S. economist at Barclays, told Yahoo Finance by phone. “So it’ll have more adverse affects than what we put down but we’d need to know what the retaliations are going to be to have specific analysis.”
In a note to clients, Barclays analysts had said they expected the tariffs themselves to reduce U.S. gross domestic product growth by 0.1-0.2 percentage points. (The most recent reading of U.S. GDP was 2.5% annual growth in the fourth quarter of 2017. A decline of 0.1 or 0.2% would be a small percentage but would represent hundreds of billions of dollars.)
The risk of retaliation was likely a known one for the Trump administration. German deputy economy minister Matthias Machnig said on Tuesday that the introduction of tariffs, <a href=