As narrative-ending as it may be to nattering naybobs, President Trump is not the first, and will not be the last, to enforce major trade policies. As Goldman Sachs points out in this fully annotated chart, the US has a long history of trade interventionism, and – as the WSJ recently pointed out – what Trump has done is merely respond to China’s own protectionist policies.
Source: Goldman Sachs
Incidentally, while it is far less discussed, we showed at the start of March that there have been extensive tariffs levied against China under both Obama’s administration, and those prior, they just didn’t get nearly as much air time. As BofAML details in the table below, Presidents Obama, Bush, and Reagan have all imposed sizable tariffs on steel in the past:
In this context, some have accused Trump of being all bark and no bite, and of being a flip-flopper on this – and other – issues. For those who remain unsure of where President Trump stands on trade, here are thirty years of his quotes on the topic:
Source: Goldman Sachs
On the heels of Wilbur Ross’ comments imploring investors to “act rationally, not hysterically,” Goldman notes that, all told, their strategists expect asset implications to be modest and largely contained to specific sectors/companies with exposure to targeted products.
But as GS global economists Jari Stehn and Nicholas Fawcett explain, “the global macro costs become significant only when a trade war really heats up, with retaliation from all sides.”
With that in mind, the key questions are:
What is the risk that the situation escalates further, and what might retaliation look like? So far, numerous temporary exemptions from US metals tariffs have substantially diminished the prospect of retaliation and escalation from some of the US’ largest trading partners. And China’s response has been measured, with Washington and Beijing reportedly in the midst of talks to defuse the situation.
For now, the questions remain: the US has yet to publish its official product list for Section 301-related tariffs on Chinese goods, and is still likely to announce restrictions on Chinese investment in the US—both of which the Chinese have yet to address, and detail just how they will retaliate.
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