Canada, Mexico, and China Announce Responses to IEEPA Tariffs Imposed by President Trump

Many analysts dare say that, in private at least, governments in other countries have huge concerns about President Trump’s second term. Some of this is down to the policies that the new administration is likely to follow in areas such as tariffs, green energy, diversity, and more. And yet, as we saw during his first term, policymakers outside the US have a tendency to copy many of these policies, and that can be a good thing for their financial assets.

On the face of it, there’s much for foreign policymakers to fear when it comes to the policies that President Trump will undertake in his second term. These are set to include tariffs, the pushback against green energy, unwinding diversity within government and wider society, disrespecting multilateral institutions, failing to tackle the huge budget deficit, and much more. And yet we find that in a number of areas policymakers outside of the US push themselves, or are pushed down, a similar path. The most obvious one is tariffs, as other countries threaten to put tariffs on the US if the US puts tariffs on them. But even leaving any tit-for-tat aside, the surge in tariffs when Trump was first in office was not just down to US action and retaliation.

We saw the EU, for instance become more willing to use tariffs or other measures, especially against China. For instance, in 2016, the year before Trump became president, the EU made just over 150 harmful trade interventions against China. But these surged during the Trump years, and beyond, to a peak of around 300 in 2023. Was this ‘copycat’ behavior a genuine response to a trade ‘crisis’ with China, or an attempt to curry favor with the Trump administration as Trump’s enemy—China—became the enemy of others as well.

We might be seeing another example in the UK right now, although we dare say that no government politician would admit to it. For it seems as if the new Labour government is adopting policies that we might not normally associate with the left-of-center Party such as significant deregulation and, most recently, sanctioning a third runway at Heathrow airport. This particular policy potentially runs foul of the environmental ambitions that Labour seemed to have when it won the election last July. But the economy is in dire straits, and perhaps the government is realizing that the best way to turn this around is to lean towards Trump-like policies.

We can also apply the same sort of logic to the issue of migration in Europe. For here too, the crackdown on migration has become far more intense as governments try to repel pressure from far-right parties who clearly sympathize with the policies towards migration that Trump has employed in the past and will likely redouble during his second term in office.

Now again, Steven Barrow, Head of Standard Bank G10 Strategy wonders whether this is an autonomous development within the region as governments accept that they need to control migration or a policy to copycat Trump in order to be seen as more sympathetic and hence more likely to evade adverse US policy measures like tariffs. Now Steven Barrow dares say that his views on this subject are anathema to many governments in developed countries, and especially those with a left-of-center bias (although there are clearly fewer of these around right now).

However, politicians on every side of the spectrum have to try to win votes, which means moving with the electorate, and if the electorate becomes more sympathetic to Trump-like policies, perhaps because of the perceived US ‘exceptionalism’ that it brings, then politicians have to move with them. Is that such a bad thing?

Again, if we turn to the UK, if Labour’s strategy of scrapping red tape in areas such as building regulations or planning for a third runway at Heathrow helps to get the country going, many will be grateful for the Trump-like shift, and it would be the same in the rest of Europe as well. Of course, these countries will cling to many things that Trump might despise, like gender diversity, multilateral institutions and more. But if they can pinch the bits of Trump’s policy agenda that can generate growth it might just work in their favor and in favor of some of their ‘undervalued’ assets, such as their currencies and their stock markets.