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Escalating Trade War Signals More Pain For Oil

Escalating Trade War Signals More Pain For Oil

Offshore tanker terminal

Trump backed off his proposed trade war with Mexico in the face of intense pressure from business groups and even his own party, but his faith in tariffs remains unbowed. In fact, Trump may have internalized a lesson that presents further risks to the global economy and to oil markets.

“If we didn’t have tariffs, we wouldn’t have made a deal with Mexico,” Trump said on Monday. “We got everything we wanted.”

The proposed 5 percent tariff on Mexico was suspended because Trump said that the Mexican government agreed to a series of demands to tighten up migration through the country. However, press reports suggest that some of the provisions in the deal, such as Mexico agreeing to buy agricultural goods, are a mirage, while others, such as expanding border security, were agreed to months ago.

Leaving those pesky details aside, Trump was triumphant. Indeed, even though the White House saw pushback from business groups and the Republican-controlled U.S. Senate, in Trump’s mind the whole episode seems to have reaffirmed his strategy.

With the U.S.-China trade war unfinished, the U.S. President feels emboldened to take a hardline on Beijing.

“The China deal’s going to work out,” Trump said in an interview on CNBC. “You know why? Because of tariffs. Because right now China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs.”

Moreover, he says that the tariffs to date have been successful. “We’ve never gotten 10 cents from China. Now we’re getting a lot of money from China, and I think that’s one of the reasons the G.D.P. was so high in the first quarter because of the tariffs that we’re taking in from China,” he told reporters on Monday. 

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