The temptation (primarily for the US but for trading partners as well) is to keep ramping up measures to convince the other side that they are serious about staying the course. Tariffs can be rolled back quickly when an agreement is reached.
Because the long-term consequences are likely to be so modest and reversible, the incentive is to move aggressively in the short term. If tariffs are popular politically, there are even more likely to be extended. That said, with so much going on in this week politically in the US – the Supreme Court nomination and meeting with NATO and the Russian president— the focus may be elsewhere.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
