On the one hand, the words said by US President Donald Trump about his country’s participation in the World Trade Organization (WTO) would still be too vague for analysts to predict that POTUS will really withdraw from it.
On the other hand, a number of political commentators stressed that the US Fair and Reciprocal Tariff (FART) Act would de facto allow the US government to ignore key WTO principles and therefore empty the WTO of its substantial value.
“America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth. The era of economic surrender is over,” said Donald Trump in his latest State of the Union Address in January. Thus the main question that could move the markets in the coming days will be whether Trump includes the WTO into such surrender.
According to Axios, a leaked draft of a Trump administration bill would “declare America’s abandonment of fundamental WTO rules” by allowing POTUS to raise US tariffs at will “without congressional consent and international rules be damned.”
According to Cyceon, such a project would further redefine world trade around US policy that is increasingly committed to changing the rules that have been used since 1945. As a result, because of the uncertainty and time needed to adapt, the stock market could be impacted negatively, less in the USA than in the EU, China, Japan and most of the emerging economies.
In a first stage, US stock markets may suffer from Trump administration’s shift but in that whole “trade war” it appears the USA remains the biggest and the most powerful contender hence in a second stage a likely consideration by investors of US stocks as a safe haven.
In the long run however, Cyceon points out that the multiplication of unilateral moves by the USA could prompt other countries to reorganize with a view to diminishing US economic clout.
Another relevant development concerns the UK whose loss of EU benefits caused by Brexit will unlikely be counterbalanced by a special trade agreement with the US if the latter does quit the WTO, this way creating another potential for deterioration of the UK economy.