Trump’s trade policy is ‘speak harshly but carry a small stick’: Citi


Joshua Roberts | Reuters

President Donald Trump speaks in support of Republican congressional candidate Rick Sacconne during a Make America Great Again rally in Moon Township, Pennsylvania, March 10, 2018.

Investors shouldn’t overreact to every trade retaliation development between the U.S. and China, according to Citi Research.

The firm said the tariff announcements aren’t as hostile as they appear.

On the “trade war rhetoric [the] bark is louder than the bite,” Eric Ollom, head of emerging markets corporate debt strategy, wrote in a note to clients entitled “Trade War or Trade Bore?” “We find the latest salvoes in US-China trade coming on the eve of an increasing probability of an agreement on NAFTA as the latest twist in a now familiar pattern of the Trump Administration regarding trade: speak harshly but carry a small stick.”

The firm’s report was published Thursday, a few hours before President Donald Trump said he instructed the U.S. trade representative to consider $100 billion in additional tariffs against China.

The move followed China’s announcement on Wednesday of tariffs on 106 U.S. products, including soybeans, cars, aerospace and defense. That move came a day after the Trump administration detailed its targets of Chinese imports to be subjected to tariffs.

Ollom noted China’s aircraft tariffs are on a size of plane that the U.S. does not export to the Asian country. Some of the agricultural product tariffs such as on beef and pork also have low trade volumes and high inventories in China.

“The Xi Administration’s response to the Trump Tariffs, while targeting industries (manufacturing, agriculture) that purportedly are Trump supporters, is also notable in that it really is less aggressive than it appears,” he wrote, referring to Chinese President Xi Jinping.

The recent rise in trade tensions between China and U.S. came after Trump’s tariff plan on aluminum and steel imports.

The administration granted several countries exemptions from the aluminum and steel tariffs last month after initially implying there would be no exemptions for any countries.

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