Trade tensions likely to remain as Trump plays to his voters
TRADE tensions are unlikely to disappear soon, Craigs Investment Partners head of private wealth research Mark Lister says.
While many might think of increasing protectionism as a huge backward step for the world, United States President Donald Trump was not concerned about the opinion of others.
He was playing to the voters who put him in the White House, Mr Lister said.
Mr Trump yesterday announced his administration would pay up to $US12 billion ($NZ17.6 billion) to help US farmers weather a growing trade battle with China, the European Union and others — a clear signal the president was determined to stick with tariffs as his weapon of choice in the conflict.
The move to cushion the blow for a politically important constituency — rural and agricultural states that supported Mr
Trump by wide margins in the election but have been targeted by China’s retaliation to his trade tactics — was met with broad criticism by many farmers and farmbelt politicians.
Mr Trump’s trade policies had become central in several rural state US Senate races ahead of congressional elections in November, as Democrats there try to keep hold of several seats Republicans have targeted.
The president, speaking yesterday in Kansas, aggressively reaffirmed his support for tar iffs and pledged ultimately, ‘‘farmers will be the biggest beneficiary’’.
‘‘Just be a little patient,’’ Mr Trump said.
To that end, the relief package was intended to serve as only a temporary boost to farmers as the United States and China negotiated over trade issues, officials said.
‘‘This obviously is a shortterm solution that will give President Trump time to work on a longterm trade policy,’’ the secretary of the US Department of Agriculture, Sonny Perdue, told Reuters.
The aid would be financed through the US Department of Agriculture’s Commodity Credit Corporation and would not require congressional approval, Mr Perdue said.
Mr Lister said the initial round of tariffs would probably have had a negligible impact. However, the stakes were raised with the announcement another $US200 billion of Chinese imports might also attract the tariffs.
The tough talk had continued and now Mr Trump was saying he was willing to go further still.
‘‘It’s extremely difficult to assess where this could all end up. Should China retaliate in kind to what’s currently pro posed, most estimates suggest this could knock around half a percent off global growth. If things go further, the impact gets larger.’’
The US had less to lose than many of its trading partners, given it had a stronger economic footing and a more closed economy than most, Mr Lister said.
At the other end of the spectrum, Europe and many emerging markets were at risk.
For New Zealand, the direct impact of the current ructions was limited. China was New Zealand’s biggest export market, taking nearly 20% of the country’s goods and services. The US was No 3 with 11%, he said.
A small, open economy was highly dependent on the ability to do business easily with the rest of the world.
‘‘We rely heavily on exports, which account for some 30% of our gross domestic product, and this is a space we need to monitor closely.’’