With Donald Trump’s second presidential inauguration just around the corner, we’re taking a look at the major stories on trade and international relations currently swirling around the former and soon-to-be US leader – including an early potential rethink on his flagship tariff policy.
Tariff policy rethink?
Sources with knowledge of Trump’s current thinking on tariffs are said to have to told the Washington Post that the incoming president is rethinking the scope of the planned measures.
While during the presidential election Trump said that tariffs would be levied on all goods coming into the US – including at even higher rates for goods entering from China – he is now said to be considering narrowing the affected goods to “critical” imports.
Only sectors particularly sensitive to national or economic security would be affected by the tariffs under the rumoured plans, the sources say. The affected goods would still include major industries such as metals, energy and pharmaceuticals.
A source speaking on condition of anonymity said:
“The sector-based universal tariff is a little bit easier for everybody to stomach out the gate. The thought is if you’re going to do universal tariffs, why not at least start with these targeted measures? And it would still give CEOs a massive incentive to start making their products here.”
Trump transition team spokesman Brian Hughes, meanwhile, responded to the reports to say:
“President Trump has promised tariff policies that protect the American manufacturers and working men and women from the unfair practices of foreign companies and foreign markets.”
Kimberly Clausing, formerly of Joe Biden’s Treasury and a University of California Los Angeles (UCLA) economics professor, argued that the measures would make American exports uncompetitive by making input imports too expensive.
“If you put tariffs on every country in the world, it’s not like we can import from Mars,” she told the Washington Post.
The FT reports that the dollar has dropped on the back of the rumoured change to Trump’s tariffs plans. Trump has since described the reports as “fake news”, which has mitigated the fall in the currency’s value.
China export controls
The Chinese government has added a range of new American companies to its export controls list in order to “safeguard [China’s] national security and interests”, CBS News reports.
Firms including Boeing, Raytheon and Lockheed Martin have been added to the country’s “Unreliable Entities List” ahead of Trump’s inauguration.
CBS spoke to Jesse Schreger, an associate professor of Macroeconomics at Columbia Business School, who said that the move appears to be a “warning shot”.
“It really does seem to be a warning shot – that escalation in US policies against China, particularly under Trump, will be met with a more aggressive response. China is signalling it will not take tariffs passively.”
Canada calling
The frontrunner for the next Canadian prime minister, Conservative leader Pierre Poilievre, has promised to strike a “great deal” with the new Trump administration on trade, according to BNN Bloomberg.
It comes following the announcement yesterday (6 January) that Justin Trudeau, the current prime minister, plans to resign.
“If you look at the history of President Trump, he negotiates very aggressively and he likes to win, but in the end, he doesn’t appear to have a problem if his counterparty also wins,” Poilievre told Jordan Peterson in an interview last week.
“I think that we can get a great deal that will make both countries safer, richer, and stronger.”
While Canada currently operates a goods surplus in its trade with the US, Poilievre said “Canada is ripping itself off” when it comes to oil, which it sells at a below-market price to its southern neighbour.
“That is the true story — it’s the pathetic story — of our trade surplus, is that we’re actually handing over our resources, stupidly. It’s not the Americans’ fault, it’s our fault, we’re stupid. And we’re going to stop being stupid when I’m prime minister.
“The last thing [Trump] should want to do is to block the underpriced Canadian energy from going into his marketplace.”
Trump has promised 25% tariffs on all Canadian goods “from day one” of his administration, in what he says is retaliation against illegal immigration and drug smuggling into the US taking place via the border between the two countries.
Italian job
Italian prime minister Giorgia Meloni paid a visit to Trump’s Mar-a-Lago resort in Florida over the weekend in a bid to strengthen her country’s relationship with the incoming US administration.
The FT notes that Trump called the meeting “very exciting, declaring Meloni “a fantastic woman — the prime minister of Italy.”
“She has really taken Europe by storm, and everyone else, and we’re just having dinner tonight.”
Those in Meloni’s Brothers of Italy party have suggested, according to the FT, that Meloni could serve as a crucial link between Trump and the rest of Europe, while Trump’s secretary of state nominee, Marco Rubio, declared Meloni a “great ally” of the US.
It comes as Meloni faces a political challenge over the detention in Iran of Italian journalist Cecilia Sala. Iran has linked this arrest to the one of the Mohammad Abedini in Milan, over charges of “illegally exporting sophisticated electronic components” from the US to Iran.
The FT adds that Italian businesses are nervous at the prospect of 20% tariffs on all Italian exports to the US, while Italy’s failure to meet its 2% of GDP defence spending commitment as part of NATO could also prove an obstacle to securing better trading terms between the two nations.
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