Trump brought the tariff

President Trump shocked the markets yesterday by proposing steep tariffs of 25% on steel and 10% on aluminum imports. This protectionism for the U.S. steel and aluminum producers will almost certainly lead to rising prices and some unpleasant economic byproducts.

President Bush’s steel tariff in 2002 provides the precedent for this action, and a roadmap for what might come. Per a report prepared by Dr. Joseph Francois and Laura M. Baughman, 200,000 Americans lost their jobs due to higher steel prices in 2002.

Trade war?

U.S. dollar has dropped as many are concerned that a trade war may already be brewing with tariffs imposed on solar panels and dishwashers in January, in addition to the aforementioned steel and aluminum.

President Trump, far from reassuring skittish investors, has inflamed this concern with a tweet early this morning:

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

For those who want a bit of reading material, DailyFX has an easy-to-read primer on the economic impact of tariffs.

May forges ahead

Prime Minister Teresa May delivered her much-anticipated Brexit speech this morning. With a strong but collaborative tone, she affirmed that the U.K. knows what they want for their bright future while also saying, “although we are leaving the EU, we are all still European.”

May also made some comments about other countries. She decried the “rise of protectionism” (quite possibly with a nod to the recently announced U.S. tariffs), and pointed to the E.U. agreements with Norway and Canada as implausible models for the U.K.

Japan QE to finally end?

In a shocking news piece from early this morning, Japan’s seventeen-year quantitative easing program may finally have an end date. Governor of the Bank of Japan Haruhiko Kuroda said the BoJ will “start thinking about how to exit its massive monetary stimulus program around the fiscal year starting in April 2019.”

Japan has been struggling with deflationary forces for some time. Is this a sign that the BoJ is disenchanted with using quantitative easing as monetary stimulus, or a sign that they view inflation to finally be returning?