Trump’s message about non-tariff boundaries is ominous

Just after the weekly FX open, US President Trump wrote on Truth Social about non-tariff barriers.

He wrote:

NON-TARIFF CHEATING:

1. Currency Manipulation
2. VATs which act as tariffs and export subsidies
3. Dumping Below Cost
4. Export Subsidies and Other Govt. Subsidies
5. Protective Agricultural Standards (e.g., no genetically engineered corn in EU)
6. Protective Technical Standards (Japan’s bowling ball test)
7. Counterfeiting, Piracy, and IP Theft (Over $1 trillion a year)
8. Transshipping to EVADE Tariffs!!!

Some of these are long-standing US complaints but it should be known that the US has a process to identify and punish currency manipulation and it never did under Trump 1.0, even in cases like the Swiss franc where manipulation was official government policy.

The problem with this tweet is #2, as virtually every major economy outside of the United States has some form of VAT and within the USA, 45 of the 50 states have a sales tax.

Trump did put something of a qualifier on the VAT distinction here suggesting that there may only be a few cases of convoluted VAT taxes that they’re targeting but it’s hard to say. In terms of the market, the entire focus on non-tariff barriers is sand in the gears of any kind of trade deal. These things almost always need to be negotiated locally if they’re going to be changed and are critical revenue raisers for governments.

I believe this stance from Trump is a big part of the reason why the US dollar is continuing to sink today and S&P 500 futures are down 0.6%. It’s not necessarily ‘the reason’ but it’s another reminder of a negotiating stance that the market doesn’t believe in.