Prof. Dr. Jan Viebig, Chief Investment Officer ODDO BHF Asset Management.
“US President Donald Trump has made good on his threat and sharply increased tariffs on imports into the US.”
In our view, these measures are harmful and risky for two reasons:
1) By unilaterally raising tariffs, the US is abandoning the multilateral trade order. It risks a trade war with its main trading partners.
2) Given the level of the tariffs that have been decided, Trump is creating risks for the global economy that cannot be reliably assessed from today’s perspective.
The US itself will suffer from Trump’s trade policy. The tariff increases will make imported goods more expensive in the US. To the extent that these cannot be replaced by US products, consumer prices in the US will rise and the disposable income of US citizens will fall accordingly. The tariffs will have the same effect on US households as an additional consumption tax.
The new tariff policy will weaken the US dollar. This will be accompanied by exchange rate losses for foreign investors in US stocks or bonds. By weakening the dollar, Trump is jeopardising the financing of the US budget deficit by foreign investors.
Trump’s confrontational tariff policy clouds the outlook for US growth. The IMF previously estimated that the US economy would grow by 2.7% this year. We think it will be difficult to maintain this estimate.
The EU has already announced countermeasures to take effect in April. We hope that Trump will use these tariff increases to force negotiations with the US’s main trading partners and that a global trade war can be averted.
On Wednesday evening, Trump announced sweeping tariff increases to the press. Imports from the EU will now be subject to a 20 per cent import tax. Tariffs on goods from China, already taxed at 20 per cent, will be raised by a further 34 per cent, bringing the total tariff on imports from China to 54 per cent. Tariffs for South Korea will be 25 per cent, for Japan 24 per cent and for Taiwan 32 per cent. In Europe, imports from the UK will be subject to a 10 per cent tariff and imports from Norway to a 15 per cent tariff. The bottom line is that there will be new tariffs of 10 per cent on most imports into the US, President Trump said.
