LIVE MARKETS-What if the real target is just China?

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WHAT IF THE U.S. REAL TARGET IS JUST CHINA?

The dollar jumped and stocks dropped across the globe due to fears that U.S. President Donald Trump's tariffs on Canada, Mexico, and China would mark an opening salvo in a global trade war that would curb economic growth.

It's challenging to forecast what will happen next, but some analysts doubt that the U.S. is willing to trigger a trade war with its closest partners, Mexico and Canada.

"The U.S. may be using economic statecraft against Canada and Mexico ahead of a larger geoeconomic and political clash," says Michael Every, global strategist at Rabobank, mentioning a common external tariff versus China to prevent transhipment into the U.S. via the ring-fenced trade agreement between U.S., Mexico and Canada, USMCA.

"Markets are largely missing that the U.S. just removed the long-standing de minimis rule exempting postal packages with a value below $800 from tariffs: over a billion of these arrived in 2024, and a huge slice was accounted for by China's e-retailers Temu and Shein," he adds.

Such a measure effectively removes downstream Chinese goods from the U.S. market.

"The U.S. also removed the duty drawback refund program where companies can claim back customs duties paid on imported materials if they are used to make products that are exported," Every argues, flagging that this effectively tries to remove upstream Chinese goods from U.S. value chains.

Trump vowed to keep the duties in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the U.S. ends.

(Stefano Rebaudo)

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