Below we excerpt from the take of DB's head of FX research, George Saravelos, on what has happened on the first day of the Trump administration with respect to tariffs.
1. No tariffs this week - while this may be stating the obvious, it is important. As we wrote recently, the market was pricing an immediate announcement of tariffs this week, which looked too aggressive. The relief rally seen in equities and the drop in the dollar on the news therefore made sense. But so does the subsequent reversal today, as we argue below.
2. A maximalist tariff agenda - we have gone through the White House memo on trade in detail. What stands out to us is the far-reaching executive authority it unleashes on tariffs. The, by now, well-known references to Sections 338, 301, 232 investigations, the IEEP and currency manipulation (Section 4421 of Title 19) are all there. But beyond that, we now have new references to Chapter 15, Section 71 - 75 of the US Code (unfair methods of competition in import trade), Chapter 19, Section 2252-53 of the US Code (serious injury to domestic industry) and Chapter 26, Section 891 (discriminatory tax practices). These open up even more executive authority for the president to impose tariffs. Beyond that, the memo puts repeal of PNTR status on China on the table. It also puts US exit from USMCA on the table. In all, we see it as setting the stage for the most expansive Presidential powers on trade in the post-Bretton Woods era.
