Political Decisions may Lead to Economic Losses

US President Trump's presence at Davos comes at a time when the American government must take a number of high profile trade decisions. According to a number of business executives and economists, the negative fallout of bad decisions could be the shattering of all economic gains which the President of the United States love to proclaim came through due to his own efforts. The stock market is most vulnerable to risk.

USTR investigation

The US administration, prior to President Trump boarding his flight to Davos, had announced that the present regime will place a number of tariffs on washing machines and solar panels. These are minor decisions which were duly disregarded by the markets. The next steps cannot be ignored. This is due to the investigation being made by the office of United States Trade Representative (USTR) on the aspect of China allegedly thieving US companies' intellectual property. The investigation into such actions is now complete, and the office of the USTR can now put a value to such damages. According to William Alan Reinsch, who was once president of National Foreign Trade Council, the amount of money could be a huge one, with a probability of one trillion dollars.

The big question in such a case as to how Trump handles such a situation. Officials in the Trump administration has presented multiple options before the president. These range from high tariffs being imposed on Chinese imports and also increasing the controls on export of goods to China. The United States may also file a number of complaints at World Trade Organization.

Private influence

This situation has sent a number of US companies into a tizzy. They are now try to influence the administration to push Trump to make a mild response. Their point of contact is Gary Cohn of National Economic Council. The companies are also leaning on the US Secretary of Commerce, Wilbur Ross. It does not help matters that Beijing knows the score and is already fighting back. It has indirectly replied that if the US takes action, it will too. Each side holds the belief that it holds a more powerful hand. There is no doubt that there could be bloody trade war. These could be fought due to the increase in tariffs, given the present US President's fondness for tariff controls. Trump has also signaled that he is willing to pull out of North American Free Trade Agreement or NAFTA as it is popularly known if more favorable terms are not provided to United States.

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