Trump’s Trade Gambit Will Generate Political Turmoil

President Trump has kept yet another campaign promise to install tariffs on aluminum and steel being imported into the US. The move has many scratching their heads, including investors that are trying to understand the unorthodox management style of Trump.

The implications of the new tariffs go far beyond the ultimate impact of the moves on prices in the US. Sure, higher costs for raw materials will increase the cost of goods sold of manufacturers of products that contain aluminum and steel. But the US economy is so large that the consumer will see very little in the way of price inflation.

The more important issue is whether the tariffs will cause a massive retaliation by larger exporters of these metals to the US. Canada, China and the EU may attempt to punish US exporters of products being sold in their countries.

The stock market responded as if the tariff gambit was the onset of Armageddon. Aluminum and steel producer stocks climbed higher. And all the major companies that use these metals to make their products fell precipitously.

Trump’s move to even the score with importers was not a surprise. He’s railed against trade actions by other countries long before he became president. In fact the unfair support of domestic industries by other countries has hurt the US economically for many years. Frankly this retaliatory action was deserved in a number of cases.

But the really important issues are the execution of the tariffs and the effect they will have on the country politically.

The US cannot operate effectively with a president who shoots from the hip without heeding the advice of his advisors that are supposed to be guiding him through very complex issues. Trump makes sweeping policy changes in tweets. Short comments by him sans detail are being made without consultation of his cabinet or his allies in Congress. The impact of this method of operation could be devastating.

The response of congressional leaders is going to be problematic. How can such a dramatic trade policy be announced without support of lawmakers? How can such a broad sweeping policy be delivered to the world without consensus among Trump’s advisors? Why did Trump create such firestorm before the details were worked out?

The aforementioned will erode Trump’s legislative options and support and result in massive frustration and greater turmoil in the Trump administration. In this regard the revolving door at the White House has been spinning nonstop. Americans are becoming increasingly uncomfortable with an unstable group of people advising an unstable president.

When one considers the political fallout of Trump’s impetuous way of governing, it suggests that the president will not be in the White House for an extended period of time. He’s sowing the seeds of his own demise. Let’s hope he doesn’t do something really damaging to or economy or to global peace.

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