Capital Economy, Business and Finance
A fair forecast of the impact of the tariffs Donald Trump proposes on US imports is that they will deliver a short-term buzz from boosted revenues followed by long-term problems – not unlike junk food.
And the signs are they will prove unhealthy for the average American consumer if imposed.
Mexico and Canada both managed to hold them at bay yesterday for a month, whether because of retaliatory threats, a recognition in the White House of their inflationary potential, or both.
Mexico supplies 63 per cent of US vegetable imports and 47 per cent of its fruit and nut imports. Canada is a vital supplier of grains, meat and poultry.
Tariffs against both countries – combined with a US agricultural sector heavily reliant on illegal workers who aren’t turning up for fear of arrest – equals a recipe for food inflation.
The Federal Reserve, tasked with bringing down inflation by setting interest rates, does not usually react to fluctuations in trade policy. But these aren’t normal times.
The Fed left its key rate unchanged in January and experts say the door to significant cuts in the next 12 to 18 months has now “slammed shut”.
