US: Trump playing a very canny game? - ING

According to Raoul Leering, Head of International Trade Analysis at ING, suggests that it seems that US President Trump is playing a smart strategic game as Trump has exempted many trading partners of the US and given them the possibility of negotiating a deal that gives them an extension of the exemption.

Key Quotes

“Trump wants these trade partners to moderate their exports to the US and stimulate their imports from the US.”

“South Korea has already complied with this demand and agreed to a voluntary export restraint for steel, a further opening of their market for American cars and a slower phasing out of the limits on exports of Korean pickup trucks to the US.”

“It is very well possible that other countries will also give in to Trump. Trade partners such as Canada, Mexico, but also China, depend much more on American demand for their products than the other way around. US demand for Mexican and Chinese products contributes respectively twenty and five times as much to their GDP as their demand for US products adds to US GDP. Also, Canada has much more to lose in a bilateral trade war with the US than the Americans.”

“China seems to blow up Trump’s strategy to blackmail US trade partners into granting the US more favourable conditions of trade so he can avoid a real trade war but get something done at the same time.”

“The EU is the other risk for Trump’s strategy. The mutual economic dependency is about the same which means that Trump can be less sure that his blackmail approach will work. Nevertheless, it is possible that the EU will give in as well. After all, the EU has, just like the US, nothing to gain from a trade war which is very likely to emerge if Europe does not give in and retaliates against the tariffs on steel and aluminium.”

“The American president is playing a dangerous game but a potentially rewarding one for the US. If Trump succeeds in getting more favourable terms of trade from his trading partners, along with perhaps relief on his defence budget, he will emerge as the winner in the noisiest trade quarrel the world has seen in the last couple of decades. This would get him in the voters' good books in the run-up to the midterm elections in the US in November.”