As Donald Trump continues to reshape the global economic order, one veteran Canadian economist says the U.S. president’s “Liberation Day” announcement did nothing to lessen the uncertainty that’s been pummeling markets and economies for weeks.
Trump’s much anticipated Wednesday proclamation from the White House Rose Garden brought the announcement of sweeping import taxes on goods from dozens of countries that his administration says have put unfair tariffs or restrictions on American exports.
But the way the Trump team calculated the level at which these new tariffs – ranging from 10 per cent to 49 per cent – should be imposed doesn’t make sense, according to David Rosenberg, founder and president of Rosenberg Research.
“What the White House did to get these numbers was they took the trade surplus that each country has with the U.S. and then divided it by their exports to the U.S., and that’s how they came up with these reciprocal tariff rates,” he told BNN Bloomberg in a Thursday interview.
“That isn’t even an estimate of what their tariff rate is but it’s a justification for lopping on these massive tariff increases… none of this make a whole lot of sense but I suppose that maybe since last November we’ve become immune or numb to all this insanity.”
Rosenberg said that economists and market watchers were hoping that Trump’s announcement would at least provide some clarity on the direction of the U.S. president’s trade and economic agenda, but that didn’t happen.
“People were saying we’re going to get to April 2 and the uncertainty is going to be lifted, to which I said, no, we’re going to get a new wave of uncertainty,” he said.
Trump’s ongoing trade war simply changed fronts, Rosenberg said, with focus moving away from Mexico and Canada and towards Europe and Asia, primarily.
Even though Canada was left off the list of countries Trump intends to target with new levies, the Canadian economy is more dependent on global trade flows than people may realize, even though it has become deeply linked with America’s.
“We’re very dependent on the U.S., however, take the Canadian dollar for example, it moves on contours of the global economy, it’s a torque on global gross domestic product (GDP) growth,” said Rosenberg.
“And there’s going to be a big negative flow-through, a secondary impact in terms of what this means for the European and Asian economy. I don’t know if there’s a complete understanding of how important Asia and Europe are to the global and North American supply chains.”
‘Trade policy on the fly’
Rosenberg called Trump’s latest trade escalation a “massive upheaval” and reiterated that “the one thing that has not changed is uncertainty,” which in and of itself can be deeply damaging to businesses, consumers and entire economies.
“Notwithstanding what the Trump team does or doesn’t do – it’s so inconsistent, it’s so haphazard and it’s trade policy on the fly – the uncertainty alone is going to cause households and businesses that make up the private sector economy to pull back on their spending,” he said.
Rosenberg said that if the current level of uncertainty persists, it alone could drain GDP growth in Canada and the U.S. by “between one and two percentage points off the baseline level, which is roughly just over two per cent.”
That scenario would have both economies approaching zero growth, which would almost certainly tip them into recessions, he said, also noting that in the near term, Trump’s trade policies are going to be inflationary.
“Once again, I’m just rolling my eyes when I’m hearing what’s coming out of the (Trump) administration and all the sycophants that actually believe the bafflegab coming out that the foreign producer is going to pay the cost (of tariffs),” he said.
“These people don’t even understand what a tariff is. The exporter does not pay the tariff. Who pays the tariff? The domestic importer pays the tariff… so of course it’s inflationary.”
