New York: President Donald Trump is reinstating tariffs on steel and aluminium from Argentina and Brazil, nations he criticised for cheapening their currencies to the detriment of US farmers, and again called on the Federal Reserve to loosen monetary policy.
Linking his trade agenda with his Fed criticism in an early morning tweet, he said the two South American countries “have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the US from those countries.”
In a second Twitter post, he signalled that he wants the US central bank to do something about suppressed currencies, too.
“The Federal Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our manufactures & farmers to fairly export their goods. Lower Rates & Loosen — Fed!”
Trump has long grumbled about the dollar’s strength and urged the Fed to abandon decades of precedent and act to weaken the greenback — the US government’s policy for which has traditionally been directed by the Treasury Department. That has prompted fears that the US could lead the world into an era of weaponized monetary policy.
While such a currency war hasn’t happened yet, Monday’s move marks the first time Trump has linked the imposition of tariffs explicitly to currency movements. As such, it signifies a potential new phase in his trade wars in which foreign-exchange markets are the battleground.
AK Steel Holding Corp. gained 5.1 per cent at 6:45am in New York, although volume remained light coming off the Thanksgiving holiday weekend. US Steel Corp. rose 2.1 per cent, and Steel Dynamics Inc. was also indicated higher.
The iShares MSCI Brazil exchange-traded fund, meanwhile, fell 1.1 per cent in pre-market trading in New York, while Vale SA’s American depository receipts fell 1.4 per cent.
In March 2018, Trump authorised a 25 per cent tariff on steel imports and a 10 per cent duty on aluminium — import barriers that heralded the start of his administration’s hawkish push on trade — after a government report found that foreign shipments of the metals imperil national-security interests.
He then directed US. Trade Representative Robert Lighthizer to negotiate with countries seeking to turn their temporary tariff exemptions into permanent ones.
In August last year, he gave South Korea, Brazil and Argentina targeted relief from quotas imposed on inbound steel shipments to protect US producers. The move allowed buyers to request exemptions for imports from key suppliers.