President Donald Trump’s eleventh-hour decision to delay the 25% tariffs he had threatened to impose on Canada and Mexico is a good reminder of his unpredictable nature. We don’t think Trump’s U-turn necessarily means he’s bluffing about other tariffs – we continue to assume a 10% universal tariff is coming in the second quarter and that the effective tariff on China will rise significantly higher. There is also a rising risk that additional tariffs will be applied to European Union imports. Nevertheless, there are clearly limits on his powers and Trump will always be willing to cut deals.
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