Visits: 2
CNBC’s Jim Cramer suggested Thursday that President Donald Trump may have bitten off more than he can chew when it comes to addressing world trade imbalances.
Almost 16 months after waging a tariff fight with China, the Trump administration on Wednesday announced that it would impose duties imports from nations on another continent after getting blessings from the World Trade Organization: Europe.
“I’m all for cracking down on China … and I think we still have the upper hand there. And I know that Europe has plenty of unfair trading practices of its own,” the “Mad Money” host said “In theory, President Trump’s not wrong to go after the EU. But in practice? I think fighting a two-front trade war could be self-defeating for our economy and for his presidency.”
The Office of the U.S. Trade Representative plans to place 10% or 25% tariffs on a variety of products from various European Union allies starting Oct. 18. The list covers $7.5 billion worth of imports that includes airplanes, whiskies, wine, coffee and some meats. The move culminated from complaints from the U.S. dating back to 2004 over subsidies to Airbus from European nations that American officials deemed illegal.
In response, European Commissioner for Trade, Cecilia Malmstrom, called the action “short-sighted and counterproductive.”
“If the U.S. decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same,” she said in a statement.
Cramer said the new developments is a win for America against unfair trade practices, but not so much for the stock market. He expects it will further drain global economic growth and that it will not reignite the U.S. economy.
Since June 2018, the world’s two largest economies have lobbed tariffs on imports from one another. The U.S. has taxes on some $360 billion of Chinese goods, with more in the pipeline, and China has retaliated with tariffs on more than $110 billion of American products. Trump wants to pressure the Chinese government into a new trade agreement.
Trump’s “two-pronged strategy” against Europe and China doesn’t have the backing the president wants from Federal Reserve Chair Jerome Powell, which would be to cut interest rates every time he escalates trade tension, Cramer said.
Support from the WTO on Europe is a win, but that should have been leveraged to negotiate better agreements, not stoke a trade dispute, with EU members, he argued.
“That’s something we can’t afford much of more, unless the Fed is on board, which it’s not,” Cramer said. “Mr. President: It’s time to get a deal done, something not unilateral, just to show that we still have a functioning government when it comes to trade.”