Nomura: Trump’s trade bark doesn’t have all that much bite

U.S. two-dollar billsPhoto by Leslie Shaffer

While the Trump administration could still become more aggressive on trade policy later, its actions over the past week have reduced the risks over U.S. trade actions, Nomura said in a note dated Thursday.

“This ‘bark is worse than the bite’ approach follows similar patterns from the administration on two other significant trade areas: NAFTA and steel/aluminum,” it said.

Nomura said Thursday’s announcement of action against China was smaller than it had expected, and it added that the U.S. has dropped one of its more contentious NAFTA demands as well as provided steel and aluminum tariff relief to many countries.

The investment bank added, that even factoring in potential retaliation from China, the announcements don’t materially affect its economic forecast.

Nomura noted the announcement had three key actions: Firstly, the U.S. Trade Representative (USTR) would produce a list of products for 25 percent tariff imposition within 15 days, followed by a 30-day comment period. Secondly, the USTR would take action at the World Trade Organization on China’s licensing practices and report progress within 60 days, and finally, the Treasury Department would create a list of possible ways to limit Chinese investment in the U.S., with a 60-day reporting period.

“Importantly, all of these actions have significant implementation lags. The earliest the tariffs would take effect would be a month and a half from now, although it could be significantly later,” the investment bank noted.

Nomura noted that the Trump administration has allowed exemptions to the steel and aluminum tariffs for countries it’s currently negotiating trade deals with, including Canada, Mexico and South Korea, as well as for countries it’s negotiating exemptions with, including Argentina, Australia, Brazil and the EU.

In addition, the U.S. reportedly has dropped its insistence that NAFTA include a 50 percent content requirement for autos, which had been a “material sticking point,” and was among factors that suggested the U.S. position was softening, Nomura said.

“Taken altogether, trade risks remain a point of concern for our economic outlook,” Nomura said. “However, the weakening steel and aluminum tariffs, softer-than-expected Section 301 announcement against China, and a slightly brighter outlook for NAFTA indicate that
perhaps trade tensions are not quite as high as previously assumed.”