While President Donald Trump’s recent decision to impose tariffs on aluminum and steel imports has roiled the markets, brace for continued volatility if two other near-term issues materialize: the issuance of Special Counsel Robert Mueller’s report on his investigation into Russian collusion, and the prospect of the Democrats winning a congressional majority in the midterm elections, according to Andy Friedman of The Washington Update.
Before the threat of tariffs, the markets “have been happy with his administration’s policies,” including tax reform, Friedman said Monday. The markets “do not want to see [Trump’s] initiatives impeded or interrupted.”
In light of Trump’s recent decision to impose a 25% tariff on imported steel and a 10% tariff on aluminum, the threat of a “repatriation” tax will potentially surface.
To impose the tariffs, Trump is using his “Section 232 authority,” which allows him to impose tariffs for national security reasons, notes Ed Mills, Washington Policy analyst for Raymond James, in his Monday commentary.
Trump and the Commerce Department have argued that the tariffs “are necessary to ensure there is adequate domestic steel and aluminum production should there be a national security emergency,” Mills writes. “As the tariffs become official, we will be watching to see if the administration will be convinced to exclude certain countries — an option that White House trade official, Peter Navarro, sent conflicting messages about over the weekend.”
But Friedman told ThinkAdvisor that he’d be “very surprised if there is a move to impose a repatriation tax,” as eliminating the tax on repatriated profits “was one of the centerpieces of tax reform, something the Republicans have been trying to do for years. They are not going to backtrack on that.”
Congress, Friedman said, “could pass legislation to overrule the president on tariffs, although it presumably would take a 2/3 vote to override a presidential veto, not to mention a lot of intraparty fighting.”
House Speaker Paul Ryan, who told the White House Monday to drop the tariffs’ plan, “will try to persuade Trump to backtrack,” Friedman adds, “but Trump is not known to give in to outside pressure once he’s announced a decision. So it’s a sticky situation at best.”