The death of Goldilocks?

OVER the last few days, the markets have been increasingly focused on the spectre of a global trade war, triggered by the recent US policy announcement. The Trump administration's decision to slap tariffs on steel and aluminium caught the market by surprise on Friday. In addition, the rhetoric accompanying the tariffs announcement has been very sharp, led by President Donald Trump himself, and has led to both the EU and Canada reacting with concrete warnings of their own.

We have focused on protectionism for a while now, seeing it as a key investment risk factor alongside inflation in the current environment. We have followed the North American Free Trade Agreement (Nafta) renegotiations closely since last year, as we believe that it provides some insight into the Trump administration's approach to trade policies. The lack of significant progress on key points of contention suggests that the US is taking a hardline stance.

In themselves, the tariffs on steel and aluminium are not significant (spending on steel and aluminium make up around one per cent of US gross domestic product and 2 per cent of global trade); however, there are two connected elements to this decision, which are significantly more concerning.