Auto tariff talk puts other countries on the offensive
Trump has launched an investigation on imposing new tariffs on imported cars in order to pressure Mexico to accept a NAFTA deal. The administration cited national security grounds but it's seen as a bargaining chip.
Officials from Japan and Germany expressed dismay and warned that it would violate WTO rules. China said abusing national security provisions would undermine the global trade system.
The section 232 is the same one that imposed steel and aluminum targets on national security grounds
At the moment, the market is treating it mostly as bluster. USD/CAD is up 53 pips to 1.2885 but a slide in oil prices is a big part of that.
More broadly, the market is only going to want to play this game of back-and-forth on trade threats and putting trade wars 'on hold' for so long. Eventually it starts to push people to the sidelines and risk aversion kicks in.
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