Tariff Tensions: President Trump’s Trade Strategy and Its Global Impact

President Trump threatening new tariffs on several countries, including raising the rate on Canadian goods to 35% and imposing a 50% tariff on Brazilian imports.

Trump also announcing new 30% tariffs on goods from both the EU and Mexico effective August 1.

He's also warned Japan and South Korea that higher tariffs are coming unless trade deals are made.

Joining me this morning to weigh in.

Patrick L.

Young, chairman and founder of Exchange Invest.

Patrick, good morning and thank you so much for joining us as we kick off a new trading week.

Well, the EU has once again delayed its retaliatory tariffs on US goods, and these countermeasures were meant to hit €21 billion worth of American exports.

So does the EU delay suggest that they expect a deal, or are they just buying time here?

I think it's typically the European Union's reaction.

They're buying time.

They don't know what to do.

Let's face it, the whole of Europe has been in alentando for a generation now.

You'll remember 20 odd years ago the US economy was actually slightly smaller than the European Union's economy.

Now it's about 20% bigger because why?

Because essentially there's been 87%, 97% growth.

In the US over the course of 20 years and there's been effectively none, 69% in the European Union.

The European Union's politicians don't know what to do.

They thought they could be clever and say we'll introduce totally tariff-free policies, blah blah blah.

No, nothing whatsoever.

Oh, except of course we're not going to change our red tape and the red tape.

Amounts to 13 million pages of bilge, which is stopping commerce, killing enterprise, and murdering the European economy, and Donald Trump isn't going to play that game.

So therefore, quite clearly, the European Union starts these negotiations at a huge disadvantage because they still don't understand the Trump playbook and they're not willing to understand the Trump playbook.

And speaking of the Trump playbook, I do want to shift our focus to south of the US border.

How does Mexico's role as an offshoring as well as assembly hub for the US and global products shape Trump's trade strategy here?

And do you think targeting Mexico with tariffs actually ends up hurting supply chains more than helping domestic industry?

So that's two fascinating points.

I mean, the first one can be answered simply.

I mean, how much does this impact Mexico hugely, because obviously, of course, in the Vietnamese agreement that Trump signed last week, a big part of that is transshipment will be penalized and clearly you can't simply penalize Chinese transshipment from.

Vietnam or indeed possibly say Thailand where there are also negotiations ongoing through to the USA and then not take Mexico, where Mexico has essentially become a construction hub, an assembly hub of all sorts of US, North American, and indeed Japanese, Chinese, and other goods.

The difficulty is, of course, in the short to medium term we're always going to have supply chains.

In problems.

So therefore that could have impacts on the US domestic economy, but the answer is clearly those who want to get with the more hyperactive states find a way to manage to manufacture your product entirely there, which is at the core of what has been the Trump repatriation of produce, repatriation of production message.

And Patrick, of course, in response to growing uncertainty as well as these terrorist threats from the US, the EU and other allies are working to build a global trade network that does reduce reliance on the United States.

So tell us about the potential economic as well as geopolitical risks for the US if allies do successfully shift trade away from American markets.

Look, the potential is absolutely enormous.

The risk to the United States of America is utterly vast, but in the real world, none of these people have been able to get it on for the last 30, 40, 50 years.

They certainly haven't in the more modern period of globalization.

We have to think back, put it this way.

Leo Tolstoy, Anna Karenina syndrome, he famously noted that all happy families are alike, but unhappy families are unhappy.

Their own way.

What the Trump situation has done brilliantly is punctuated this.

Free traders are all happily alike, but unfortunately those in the tariff wars, they're all unhappy for their own way.

There's no way that the European Union can suddenly cozy up to China without China effectively making the European Union its dumping ground.

There is a huge number of anomalies in this position.

The smug concept of the technocrats that, oh, we're All just suddenly going to reunite because really we're all united is bilge.

There is much more in common with the likes of the European Union and free trading America or at least capitalist America than there is with, say, China or Iran or a vast number of other states.

It does not stand to reason that the European Union can suddenly turn around when they're incapable already of negotiating with Trump.

And equally other vast large nations are not going to be. to find a better way forward even within, say things like ASEAN, etc. because they've been bumping heads with the likes of the European Union for many, many decades and that's why look at what's going on here.

We've ultimately got China, Vietnam, and the USA.

They're endeavoring to get themselves through the finishing line and keep trading with America.

What does that tell us about world unity for the rest of the world?

There isn't any.

The threat is huge, but the likelihood of it happening is almost nonexistent.

Yeah, Patrick, I like the analogies as well as metaphors to family dynamics in terms of what we're seeing here.

We know that there have been new acronyms added to our lexicon this year because of some of these tariffs and trade uncertainty.

So do you think investors are right to bet that Trump will back down on some of these tariffs, or could this escalation actually spark a sell-off or slow certain economies?

I think there's two different points there actually, Remy.

So the first point, I'm not sure that Trump is going to back off so rapidly in this phase.

I think the message has gone out.

You've got to negotiate.

You've got to get a deal.

A lot of people have been somewhat laggardly in trying to do deals, and actually that's why it stands to the advantage of the UK, Vietnam, and indeed also China that they've been in there and.

See it hard and fast.

Negotiate, get a deal by August 1st.

I think you'll manage to find a much better tariff position.

Does that, on the other hand, mean because we're going to see this whole reshaping of tariffs, which we already have, let's face it, I mean Trump has fundamentally reshaped tariffs even at the point where he's supposedly pulled back in what he's doing.

The simple answer.

I think markets are getting less worried about this as they go along.

If we see ourselves back in the situation of the USA with 100% or so tariffs like they had with China a month ago, markets will get spooked.

If it's a negotiation and we're in 2030 or maybe 40%, then I think markets will not sell off hugely, although I think there may be nervous days.

OK, Patrick, well, we will have to leave it there, but always great to kick off the trading week with you.

Thank you so much for joining us and we'll see you again next week.