Topline: Trump aimed fresh rounds of tariffs at France, the EU and two South American countries within one 24-hour period, potentially upending any China trade talk progress and leading to market declines at the start of the month.
Potential 100% tariffs on French goods, including champagne, yogurt and other luxury goods, were floated by the U.S. Monday as retaliation for France’s digital tax, which the U.S. says unfairly targets American tech companies such as Apple, Facebook and Amazon.
After the World Trade Organization ruled Monday that Airbus received “market-distorting” subsidies compared to rival Boeing, the U.S. responded by threatening more tariffs on a wide range of EU goods.
Also Monday: Trump took to Twitter and announced an immediate reinstatement of tariffs on steel and aluminum produced by Brazil and Argentina.
Markets, which have previously reacted in lockstep with Trump’s proclamations, were hit Monday by the news, with the Dow losing 250 points and the S&P hitting its biggest downturn in two months.
By Tuesday morning, Dow futures dove 200 points after Trump said he was in no rush to close a trade deal with China.
China further tempered investor optimism by promising to issue an “unreliable entity list,” which would include every country deemed as harmful to Chinese interests.
What to watch for: How this fresh round of tariffs might affect in-progress trade talks with China or the North American Free Trade Agreement (NAFTA). Markets, fueled by optimism over progress for a China trade deal, have hit record highs in recent weeks before Monday’s declines.
Key background: Tariffs and trade have become major components of Trump’s foreign policy. The Washington Post reported Monday that the White House was expecting to hem in Trump’s adversarial approach to trade deals leading up to the 2020 elections, and that the Brazil and Argentina tariff announcement was a surprise. Trump, however, has used Twitter previously to announce trade policy decisions. In June he called off 5% tariffs on Mexico, and in August he slapped China with 10% tariffs. Both were announced on Twitter.