A 10% floor on tariffs is a problem

At this point, I don’t think anyone should take anything from the Trump administration at face value but what Kevin Hassett said today is a problem for the US and the global economy.

Hassett was on CNBC earlier today and said that the expectation is for the 10% universal baseline tariff to remain in place over the long term.

“It would take some kind of extraordinary deal to go below there,” he said.

That’s the kind of thing that begs for retaliation and ensures dislocations in international trade. Now this is obviously better than some of the ‘reciprocal but not reciprocal’ levels but it’s also a miscalculation to think that other countries will roll over and accept it, particularly not in the long term.

The US may think that by threatening higher tariffs and then backing down (escalate to de-escalate) that it will get away with these rates but I don’t think that’s the case. Again, I’m not putting a huge weight on what Hassett is saying here but with just a 90-day window, it won’t be too long before we find out.

This article was written by Adam Button at www.forexlive.com.