Dan Steinbock
At the wake of the 2008 financial crisis, investor Warren Buffett warned of derivatives as weapons of financial mass destruction. President Trump’s “reciprocal tariffs” could have a similar impact on world trade.
Last week, President Trump tasked his economic team with devising plans for “reciprocal tariffs” on every country taxing US imports. Designed in part as bargaining leverage with other countries, they are ramping up prospects for a global trade war with both American allies and adversaries. As Trump put it, “I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less.”
Since Trump did not impose new tariffs yet, Wall Street sighed in relief. Though the prime financiers of the Trump campaign, U.S. financial institutions are increasingly concerned that the administration’s new tariffs are broadening trade war, penalizing consumer and business confidence and risking accelerated inflation in America.
The financial institutions should be concerned. The only reason that Trump did not impose fresh tariffs was that he initiated investigations that could ignite a far worse global trade war toward the late spring.
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