Commodity currencies, like the Australian dollar have all rise the boost thanks to the weakness in the U.S. dollar. This could lose some steam if the new wave of protectionism and tariffs out of the United States has some teethe.
In a Reuters article, the US Commerce Department introduced, Friday, a range of tariff options for President Trump for imports on steel and aluminum. They range from a blanket increase in levies on all imports to targeted measures against certain countries.
China has responded, and not too kindly. They called current American protection of its domestic iron and steel markets excessive. China will reserve the right to retaliate should Washington become too aggressive. Japan’s steelmakers have also expressed concerns. Companies in India have been quiet on the topic.
During his campaign Trump was adamant with his desire to protect American jobs from unfair foreign competition. His early withdrawal from the Trans Pacific Partnership, was a mere shot across the bow. Since then his administration has barked more than it has bitten. However, Trump and his admiration feels that Chinese steel production often dumped, unfairly, product on global markets.
Things are about to change and some form of steel and aluminum tariff will be imposed on foreign products.
Commodity Investors wait on U.S. Tariff Policy
Commodity investors, with both currencies and products are waiting on the details but it seems likely that even slightly more protectionist United States will be seen as bad for commodity or risk currencies.
These include future headwinds for the Canadian Dollar, the Australian and New Zealand dollars. There could be fallout for equities as well. There could be bid for safe havens like the Japanese Yen and, U.S. Dollar. The Euro is likely to get caught up in this. A more protectionist world would be seen a threat to Europe’s economic recovery.