Cnn
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Donald Trump has just taken the greatest bet of his young presidency.
Its 25% switching hammer Prices against Canada and Mexico This coup at midnight has made a new shock for an economy showing alarming signs of slowing growth and increasing inflation – a perilous mixture for any president.
Trump has also doubled an additional price on all 20%Chinese imports, in a trio of decisions that have sent actions – a cherished metric of his own performance – a tumling. The timing was not very conducive, before Trump pronounced a joint conference address on Tuesday evening which will be monitored by a nervous nation about the prices of housing and stubbornly high grocery store. But for the narrower public of his most loyal supporters, who show no sign of taking off, Trump is likely to charge his new trade wars as proof of resolution and commitment to his populist promises.
Trump’s decision to press the button, after having previously delayed the functions on American neighbors a month ago, reflects a duel between his political heart and his head.
The often volatile president considered prices as an almost supernatural economic tool since his agreements as a real estate tycoon in the 1980s to tear. In addition to immigration, the vanity that foreign nations constantly tears away from America constitutes the foundation of its political career.
“It will be very expensive for people to enjoy this country. They cannot come and steal our money and steal our jobs and take our factories and take our businesses and expect not to be punished, “said Trump on Monday. “And they are punished with prices. It is a very powerful weapon that politicians did not use because they were dishonest, stupid or paid in another form. »»
Until the last hour on Monday, investors hoped that Trump was going to take a ramp out of the ramp. Earlier, Commerce Secretary Howard Lutnick told CNN that Mexico and Canada had done a “good job” to limit illegal border crossings in the United States, but had to do more to stop the fentanyl flow – increase the expectations of another possible price break, as happened a month ago after strengthening border security.
But Trump’s fateful movement to move forward with prices actions sent On a dive: the Dow lost 650 points on Monday, after having clarified its intentions and was down by a 600 additional points and more In the middle of the morning on Tuesday.
“The market expected that something happens which would mean that the prices would not be implemented … It has in addition to a strong smell of stagflation – which means lower growth and high inflation which has been apparent in a certain number of data versions and, as we know, the prices will simply accentuate Cambridge, told Richard Quest.
Trump’s decision to launch large -scale commercial wars with the American neighbors is a historic moment in his second mandate and is only the last opportunity when he is stuck to his campaign campaign promise despite the huge disturbance that the honor of his word implies.
And it is a reminder of the ambition that underpins his return to the White House – and what he considers an unfinished business. If the prices persist, they will highlight its determination to follow the objectives of which it was expressed during its first mandate by political aid of the establishment.
Now he tries to redo the world on several fronts.
Before climbing his efforts to cancel the global free trade system and decades of globalization, Trump has questioned the American security guarantees that have taken out the Transatlantic Alliance since the Second World War. And his efforts to empty American federal agencies alongside Elon Musk are an attempt to erase the domestic power and the career public service which has prevailed by many presidencies of the two parties.
Trump’s faith in prices survives every warning of economic analysts each consumers rather than rival commercial powers will pay them.
The prices – a device used for generations earlier in the history of America, but it was largely removed in the 20th century – are stamped in the DNA of Trump’s “America First” movement. Their implementation against Canada reflects the vision of the world behind its eruption to the Ukrainian President Volodymyr Zelensky in the Oval Office last week. For Trump, all foreign policy is a monetary transaction in which the United States wins or benefits. This state of mind prevents the idea that America has friends or allies with common interests. Instead, its use of prices to try to reach the Mexico and Canada concessions on immigration shows that its White House considers them not as an exclusively economic tool but in the context of a deeper national security arsenal.
Trump’s turn against the neighbors – with whom he won a North American trade agreement updated during his first mandate – has broken down obligations that are deep.
He threatens to present Canada, a long time a faithful friend and half of one of the most profitable trade relations in the world, in recession and to cause high job losses. This, as well as Trump’s suggestions according to which the Far North White became the 51st state sparked Fury north of the border and generalized boycotts of American products.
“ They come into force tomorrow ”: hear the announcement of the price of President Trump
Canadian Minister of Foreign Affairs Melanie Joly promised on Monday that the Ottawa government was “ready” with prices of $ 155 billion on American products – including a first tranche worth $ 30 billion. Mexico also promises to react, increasing the prospect of an prolonged economic war unless Trump fell back – perhaps with a claim of victory concocted before the new prices had time to seriously harm the regional economy.
Trump has placed in a political box. If he imposes prices, he plays with fire. If he does not do so, everyone will think that he was still amazing and he will work his own effect of economic lever.
Even if he yields, Trump’s constant threats combine an unstable environment for investors and consumers.
For all its legendary resilience, the American economy flashes a weakness. Consumer confidence is plummeting with consumer spending. The GDPNOW model of the Atlanta Federal Reserve planned on Monday a reduction in growth of 2.8% for the current quarter.
Thus, Trump – who also promises reciprocal prices on most world imports next month – could play with economic fire.
The risk is particularly acute because the frustration of voters against high housing and grocery prices contributed it to the victory in last year’s elections. Do not solve these problems – or exacerbate them with wooden and agricultural products – could cause a counterou, in particular for republican legislators in the mid -term elections of next year. In a CNN / SSRS survey published on Sunday, 52% of respondents said that Trump had not paid enough attention to the country’s most important problems.
Trump justification for handling prices is that decades of free trade policies and stages like bringing China to the World Trade Organization have widened American manufacturing and sent millions of blue collar jobs abroad abroad. He is not wrong – although these policies have also increased the standard of living for us with a flow of imports at lower prices. And Trump believes that the reassessment of trade barriers will bring these jobs and factories.
“For example, North Carolina … I went there to buy furniture for hotels, and it was wiped out. This company has all gone to other countries. And now it will come back to North Carolina, “said the president on Monday. To bring his point back to the house, he appeared in the White House on Monday with the CEO of Taiwan Semiconductor Manufacturing, who undertook to pay $ 100 billion in the manufacture of fleas in the United States.
But with less than four years in Trump’s mandate, do companies undertake the expenses and the disruption of the location of the factories of salary economies abroad? And even if they do, higher costs of labor, materials and transport in a developed economy could mean higher prices in stores.
The Democrats, who had a hard time responding to the shock and fear of Trump, suddenly have an opening.
Massachusetts Senator Elizabeth Warren, who sometimes recommended prices as part of a broader economic strategy, warned that the inflation prospect will attenuate Trump’s speech on Tuesday. “Notice the corrective that it places it,” said the Democrat to Kasie Hunt of CNN on the inaugural edition of his new show “The Arena”.
“Remember, he said (on the first day, he would drop the prices of American families, the first day,” said Warren. “After being elected, he said he was elected according to the prices of the grocery store and his promises – now we are six weeks, he did nothing to reduce prices. And, in fact, it seems that inflation increases.
“So he is exactly upside down from his promise.”
Warren’s comments highlighted Trump’s bet. There is no way that importers can bear the cost of prices by 20% or 25% without transmitting them to consumers. And when tomatoes, fruits and gases and alcohol are priced and new cars are suddenly out of reach, his faith for life and not tested in the magic properties of “beautiful” prices could crash in reality.
This story has been updated with additional developments.