Chief economist update: The art of the deal exemplified

And so it comes to pass. US President Donald Trump did what he promised he would.

"Today I'm defending America's national security by placing tariffs on foreign imports of steel and aluminium...we will have a 25% tariff on foreign steel and a 10% tariff on foreign aluminium when the product comes across our borders."

A statement issued by the White House titled, "President Donald J. Trump is Addressing Unfair Trade Practices That Threaten to Harm Our National Security", lists the justifications for the decision to raise tariffs that would commence in 15 days.

Surely, America's trading partners would also make good their counter-threat for retaliatory actions...and the trade war is on!

But instead of diving US equities rose - the S&P 500 gained 0.5%; the Dow 0.4%; the Nasdaq 0.4%. Buy on news? Perhaps.

It could be markets are hoping that Trump's other threat of more tariffs to come - i.e. "reciprocal taxes" on countries charging higher duties on US products - could cow other nations from retaliating.

It could also be because of Trump's "benevolence". Whereas, he initially said that there would be no country exempted from the increase in tariffs, there's now "grace" for America's allies.

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As Bloomberg reports: "Trump agreed to exclude Canada and Mexico from the duties because of their status as key regional allies and partners with the US in renegotiating a new North American Free Trade Agreement, said the official, who spoke on condition of anonymity. Any US trade partner has the option of asking to be excluded from the tariffs, the official said, and allies could be excluded if they can demonstrate how the tariffs would damage their national security."

Yes Virginia, it's the divide and conquer rule! This is because instead of ganging up on America, every other country would be down on their knees begging King Donald, to "please sir, can I have what Mexico and Canada is having?"

But not too fast. According to the Australian Financial Review: "The exemptions for Canada and Mexico would start immediately, but their continuation would depend partly on progress in negotiations to modernise the North American Free Trade Agreement, the official said. He added that NAFTA was an important part of the US-Canada-Mexico security relationship."

Yes again Virginia, King Donald will be getting what he wants on NAFTA too.

And that my friend is "The Art of the Deal" exemplified.

Ben Ong is the Director of Economics and Investments at Rainmaker Group. He previously worked as a fund manager, economist, asset allocation strategist, portfolio analyst and stock market analyst. Check out his economics analysis here.

Read more: AmericaCanadaMexicoKing DonaldNAFTANorth American Free Trade AgreementThe Art of the DealUS President Donald TrumpWhite House
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