While many economists may find it reassuring that even the most advanced artificial intelligence appears unable to foresee President Trump’s next decisions on tariffs, not knowing what’s coming next does not really help investors.
Another round ofUS trade policy announcements surprised markets (yet again) on Friday 23 May, with a threat of 50% tariffs on European exports to the US from as early as 1 June. The US administration felt European negotiators were not acting in good faith and should no longer benefit from the 90-day tariff pause it had granted on 9 April.
Just two days later, after speaking with European Commission President Ursula von der Leyen, Trump (yet again) decided to push the deadline back – it is now 9 July. The goal is to reach a ‘good deal’ on trade with the European authorities.
Meanwhile, trade talks between Japan and the US are progressing. The US Treasury Secretary is expected to participate in the bilateral discussions scheduled for this week. Japan’s prime minister would like to achieve an outcome during the G7 summit in Canada from 15 to 17 June.
How to read US trade policy? Donald Trump appears to oscillate between a (very) hot and (very) cold treatment of US trade partners to move negotiations forward. It looks unlikely he will be thrown off course, but when financial markets scatter and turmoil breaks out, he tends to suddenly ease up on the pressure. Such a volatile strategy implies volatile markets.
