Trump’s ‘disruptive’ tariffs could actually be good for free trade defenders, strategist says

FAN Editor

President Donald Trump‘s decision to press ahead with one of his most contentious campaign promises will likely galvanize defenders of free trade in the long run, according to one market strategist.

The U.S. president signed two proclamations on Thursday that implement tariffs on imported steel and aluminum imports — with exemptions for Canada and Mexico. In a move the White House said was an essential matter of domestic and economic security, the U.S. will levy a 25 percent charge on steel imports and a 10 percent tariff on aluminum imports.

“It’s a disruptive, external shock to the global trading system… (But) I actually think that this will have positive effects in the long run,” James Lucier, managing director at Capital Alpha, told CNBC on Friday.

“It makes people in the United States who have not stood up to support free trade much more anxious to do so now that they see the possible consequences of the benefits of free trade being taken away,” he added.

Trump’s shock decision to impose global duties on metal imports has prompted a backlash from around the world amid heightened fears of a tit-for-tat trade war.

Several global trade chiefs have decried the prospect of trade tariffs, with the International Monetary Fund (IMF) and World Trade Organization (WTO) also publicly critical of its potential ramifications.

“For me and for Belgium and for Europe, we are very worried about the possibility of an escalation because Europe can take some measures and then the United States takes some other measures and then we have a (trade) war,” Kris Peeters, deputy prime minister of Belgium, told CNBC on Friday.

In reference to the likelihood of an intensifying trade dispute, Peeters said: “Starting a war is not so difficult; ending a war is very, very difficult.”

Trump is using authority under Section 232 of U.S. law, which gives the president the ability to issue tariffs based on national security concerns. The administration official said the pivotal role the steel and aluminum industries play in defense munitions and economic security will easily justify the 232 citation.

Critics, though, say the argument is flimsy and will worsen economic relations globally, possibly triggering a trade war. Financial markets have been volatile since Trump indicated late last week that the tariffs were coming.

Ahead of Trump’s decision to establish the tariffs into law, Gary Cohn, director of the National Economic Council announced he was leaving his post. The Wall Street veteran was seen as a voice of reason in the White House and a known opponent to the global duties.

Capital Alpha’s Lucier said an overhaul of U.S. trade policy had long been an issue lawmakers on Capitol Hill wanted to confront, though it had taken Trump’s threat to impose global duties to force the issue to the top of the agenda.

“Trade had been on the backburner, Trump is forcing it on the front-burner. The question is with this disruption can we figure out a way to unite with our trading partners and come up with a positive strategy that actually works?

“I think it is actually positive rather than negative even though it is certainly not a conventional approach to motivating people,” he said.

— CNBC’s Jeff Cox contributed to this report.

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