President Donald Trump has signed an executive order raising tariffs on imported steel and aluminum from 10% to 25%. This decision encompassed key trading partners of the United States such as Canada, Mexico, Japan, and South Korea, although there were initially considered for exemptions. Trump, however, suggested the possibility of exempting certain countries, including Australia, which maintains a trade surplus with the US.
The new tariffs came into effect the same day as a 10% tax was implemented on goods imported from China. Additionally, the President announced the possibility of introducing so-called “retaliatory tariffs” against countries imposing high tariffs on American products. Industries potentially most at risk include the semiconductor industry, automotive and pharmaceuticals.
The impact of increases on financial markets may be limited, although sectors that consume large amounts of steel and aluminum will feel it most – particularly construction, automotive, and heavy industry. In the short term, companies may experience a decline in margin, however, part of the additional costs will likely be passed on to consumers.
Market reactions to Trump’s announcements have so far been mixed – after periods of unrest usually followed a rebound, not long-term declines. However, tariffs could seriously worry investors if they lead to a decrease in confidence among companies and consumers or increase financial instability. A sign of growing risk could be a long-term increase in the VIX volatility index above level 20 and sharp fluctuations in the exchange rates of countries covered by the tariffs. There are also opinions that if all of the US President’s proposals are implemented over a longer period, the markets may experience significant declines.
Krzysztof Kamiński – Oanda TMS
Source: https://ceo.com.pl/trump-wprowadza-wyzsze-cla-na-stal-i-aluminium-25-zamiast-10-49871
