Meanwhile, European, Canadian and Chinese leaders have all promised to respond in kind, threatening to tax U.S. exports of Harley-Davidson motorcycles (home state of Paul Ryan), bourbon whiskey from Kentucky (home state of Senate Majority Leader McConnell) and Levi’s jeans from California (House Minority Leader Nancy Pelosi’s home state).
Goldman noted that China – seen as a principal target of Trump’s protectionist policies – could easily slap tariffs on U.S. soybeans, which averaged half of all American agriculture exports to China over the last five years and for which the Asian nation is the largest export market.
“Although the administration has hinted at niche market exemptions, it has reiterated that no country will be exempt,” Currie added. “This analysis points to three downstream industries as being potentially vulnerable: motor vehicle and trailer parts, can manufacturing, and to a lesser extent soft drink manufacturing.”
To be sure, some on Wall Street remain optimistic the president’s taxes will excuse key trading partners like Canada and Mexico despite the fact the administration has yet to produce a finalized, written proposal.
Trump’s Commerce Department has cited Section 232 of the 1962 Trade Expansion Act in making its recommendation for tariffs. Department leaders contend that the dumping of cheap steel and aluminum from China and other countries puts U.S. competitors out of business, risking national security.
“This is the irony of Section 232,” concluded Currie. “A tariff intended to support U.S. industry may end up boosting margins and investment for a small subset of producers while leaving the broader economy at a disadvantage via higher costs.”