Economic guru Ron Insana contends that President Donald Trump’s “easy win” trade war is a no-win situation for Wall Street and Main Street.
The author of four books on Wall Street contends that trade-related disputes with Japan and Germany helped precipitate the Crash of 1987.
Trump unveiled his decision last week to impose tariffs on steel and aluminum imports, a decision said he would make official early this week.
Meanwhile, the U.S., now faced with $1 trillion annual budget deficits, will again be increasingly reliant on the "kindness of strangers" to finance those budget deficits, Insana wrote for CNBC.
However, this president and some of his closest advisors are unilateralists and would prefer to renegotiate a host of trade treaties that have taken some 70 years to forge, the CNBC and MSNBC contributor wrote.
If this president moves forward with these "beggar-thy-neighbor" policies, there will be unintended consequences.
“With any luck, they will be short-lived until the president's more level-headed advisers can bring him back into the global fold,” Insana wrote.
Many financial analysts warn that Washington’s sudden push for steep tariffs on steel and aluminum imports could saddle the U.S. Federal Reserve central bank with the worst of both worlds - rising inflation and a slowing global economy.
The combination of fiscal stimulus, which Fed officials viewed as hardly a game-changer for monetary policy, and a brewing trade war is a recipe for the sort of no-win situation central bankers faced in the 1970s when they had to stomach high inflation or run the risk that interest rate increases would trigger a recession, Reuters explained.
The central bank will now have to factor in the macroeconomic impact of the tariffs, which is expected to be small in itself, but also the broader risk of global retaliation, government-imposed price pressures on a variety of goods, and an ebbing of world trade.
Canada, Brazil and the European Union have already threatened countermeasures, representing what economists refer to as a“deadweight loss” to global welfare. The International Monetary Fund on Friday said Trump’s move likely would damage the U.S. economy as well as the economies of other nations.
In his Capitol Hill testimony, Fed Chair Jerome Powell described trade as a“net positive” while conceding it created some losers in the economy, and said“the tariff approach is not the best approach. The best approach is to deal directly with the people who are affected rather than falling back on tariffs.”
The Fed is expected to increase rates at its March 20-21 policy meeting. Policymakers will also issue fresh forecasts that will indicate whether the core of the rate-setting Federal Open Market Committee has shifted its view, Reuters explained.
For his part, Trump on Monday appeared to suggest that Canada and Mexico could win exemptions to his planned sweeping tariffs on steel and aluminum if the two countries sign a new NAFTA trade deal and take other steps.
"We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed," Trump tweeted.
"Also, Canada must treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying," he added.
(Newsmax wire services contributed to this report).
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