Are we going to trade more than jabs?

That is what the markets (and the world) are starting to wonder as this week the Trump administration moved forward on tariffs for steel and aluminum imports.  This follows tariffs on imported solar energy modules and precedes anticipated action in regards to China (specifically intellectual property).  While the final details are not known as of the time of this writing, it is anticipated that there will be exclusions and offsets to the negative impact (such as excluding Canada and Mexico).  This outcome would be in-line with the solar module result where a threshold of 2.5 gigawatts was set before a 30% tariff kicked in.  In the “art of the deal”, it seems the administration starts with a big, bold statement and then whittles it back.

From our seat, tariffs on steel and aluminum are consistent with the policy trajectory Trump has espoused from the start.  From the early days when he pulled out from various multi-national arrangements (like the Trans Pacific Partnership which is expected to be signed by eleven member nations excluding the US this week), Trump has sought one-on-one negotiations on trade where he can pit self-interest (“America First”) against self-interest (that of the other nation) in a bilateral agreement rather than one-on-many in a multi-national agreement.

Reading between the lines, the logic would seem that nations that seek favorable access to the US market (consumer and business) have to come to the negotiating table with something to offer in exchange.  It is a delicate diplomatic dance, especially as the target moves bigger as it will when attention turns to China.  Eyes on the future, China has promised a “necessary response” to tariffs implying that the current footwork may be more of a boxing match.