US: The sky seems to be the limit for US tariffs – Commerzbank
As if the prospect of renewed conflict with China were not enough, Donald Trump announced on Friday that he would double tariffs on steel and aluminium imports to 50%, Commerzbank's FX analyst Michael Pfister notes.
Likelihood of a deal with the EU is moving lower
"The EU responded with unusual severity, threatening to impose retaliatory tariffs. The EU had already announced these after the US introduced reciprocal tariffs, but, like Trump, delayed their implementation by 90 days to allow time for negotiations. Following this latest development, the likelihood of a deal with the EU is probably moving lower."
"When we discussed the threat of 50% tariffs on all EU goods here last week, we noted that the level of tariffs appeared to have been set arbitrarily and was not limited by those announced on Liberation Day. Many countries are likely to question the stability of a potential deal with the US if the US administration imposes country-specific tariffs while simultaneously raising product-specific tariffs at random."
"For example, what benefit does it bring the United Kingdom to set tariffs at 10% if individual components are exempt and subject to ever-higher tariffs? With such erratic US trade policy, where tariffs are only going up, there is a risk that other countries will turn away from the US. In the long term, this is not good news for the US dollar."
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FXStreet Insights Team
FXStreet
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