Foreign governments are weighing their options following President Trump's apparently capricious declaration of a trade war on Wednesday. "We will put tariffs on Harley-Davidson, on bourbon, and on blue jeans — Levi's," said European Commission President Jean-Claude Juncker of possible means of retaliation should Trump's steel and aluminum tariffs plan be realized.
Canada, China, and the European Union have all pledged retaliatory tariffs targeting American industry, and Trump's proposal has reportedly undercut NAFTA negotiations with Canada and Mexico. "Why are we signing a trade deal with a country that would unilaterally decide to restrict certain sectors?" asked Jorge Guajardo, former Mexican ambassador to China.
Other countries could also begin dumping American debt, which would wreak havoc in the bond market, especially as the Trump administration's tax cuts and military spending hikes together push the deficit back toward $1 trillion annually. "The timing of this would be poor," Kevin Giddis, an executive at financial services company Raymond James, told Reuters, "since the Treasury needs to tap the capital markets more than ever, in greater size, to pay for the plentiful tax cuts passed a few months ago. Bonnie Kristian