Trump Trade Policies Creating Stronger Alliances Overseas and Weakening Some Domestically

President Trump has continued his goal of reshaping international trade agreements and he has stepped up his proposed tariffs in order to get cooperation from other countries. The most recent targets have been some of America’s biggest allies—Canada, Mexico and the European Union. The Trump plan does seem to be creating some cooperation abroad, but not cooperation with the U.S., but rather cooperation among other countries that wish to maintain the EU and strengthen it.

Last September, French President Emmanuel Macron laid out his vision of how the EU could strengthen itself and prepare for any future economic crisis. At first Macron’s comments didn’t draw much attention. But in the wake of the new tariffs on aluminum and steel that target the EU, German Chancellor Angela Merkel recently issued similar statements.

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By most accounts, Macron’s proposed overhaul of the EU is a little more drastic, but the fact that the leaders of the two largest economies in the eurozone are thinking along the same lines is a step toward cooperation. Chancellor Merkel has the benefit of timing on her side as her comments came right after the new tariffs were announced. The fact that Italy formed a populist government last week is also weighing on everyone’s mind.

Ms. Merkel stated in an interview with a German magazine, “America is and remains the superpower, but at the moment it doesn’t recognize multilateral agreements in all areas, as shown by the decision to leave the [Paris] climate accord and now the tariffs that President Trump has levied against Europe.” She also added that changing the EU’s structure would ensure that “its voice is taken seriously in the world.”

In the long run, having a stronger EU is probably good for everyone. It will be better prepared to handle any crisis that may arise—financial, political or any other type.

While the trade policies seem to be driving France and Germany closer together in an effort to strengthen the EU, here at home President Trump is getting push back from some of his supporters. Two of the most notable conservative voices are the Koch brothers and they have announced intentions to launch a campaign against President Trump’s tariffs.

The conservative political advocacy group Americans for Prosperity was founded by Karl Rove and David Koch. Tim Phillips is the president of AFP and in an interview on Bloomberg on Tuesday he voiced the group’s concern regarding the tariffs. “The Trump administration has taken some incredibly positive steps for the American economy, but tariffs will undercut that progress and needlessly hamstring our full economic potential,” he stated. Adding that, “There are better ways to negotiate trade deals than by punishing American consumers and businesses with higher costs.”

Losing support from his political base here at home could cause the president to rethink his trade policies. We have mid-term elections right around the corner and the last thing he wants is to start losing such key supporters. This would weaken the Republican Party and could potentially cause them to lose control of the House or Senate and maybe both.

I have stated before that I think it is a worthy cause that President Trump has undertaken. There were far too many inconsistencies and unfair practices taking place in international trade. I have also voiced my concern that if he pushes the issue too far, it could throw the U.S. and the world in to a recession. It appears that others share my concern.

About Rick Pendergraft

Rick has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick’s analysis process includes fundamental, sentiment and technical analysis. Rick started college as an education major, wanting to teach economics, but eventually changed to majoring in Economics and received a Bachelor of Science in Economics from Wright State University. His desire to inform and educate people is at the heart of his writing.