(June 6): President Trump’s abrupt decisions to impose tariffs on goods from Mexico (initially set at 5% on June 10 and gradually raised to 25% unless Mexico takes more forceful action to contain illegal immigration) and also to end India’s preferential trade status represent further broadening of the US administration’s tensions with its trading partners.

It is becoming apparent that President Trump intends to systematically wield trade barriers as a tool for foreign policy, which bodes ill for global trade and also weakens the chances for a US-China trade agreement over the near term.

It will be a close call but we see slightly better-than-even odds that the first 5% tariffs on Mexico goods on June 10 will take place. For US-China trade, a trade agreement by the G20 in late June is not likely, in our view, and we now see a baseline scenario that negotiations will be long-drawn-out with some US tariffs on the final $325b of Chinese imports likely to be implemented in mid-July or after.

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