A new type of weapon in town?
I guess not so new, but certainly a very blatant - and extremely effective - weapon:
Does Mr Trump’s threatened tariffs on Mexico represent a new application of this tariff weapon as a stick to punish countries (any countries) that do not behave in line with US requirements?
At least on this occasion it has worked exceedingly well as a win - win - win - win situation for Mr Trump:
The rapidly achieved agreement on the changes to Mexico’s northern and southern borders not only achieves a significant partial solution to a major and growing problem but will certainly (and deservedly) earn Mr Trump a few more political feathers in his cap as a fast, cheap and effective solution! - win
But what if agreement had not be achieved?
The US stock market would probably remain firm but additional fears would appear of slower growth globally. This only serves to weaken the other power regions of China, Russia and Europe relative to the US - win
Oil markets tend to look at growth globally rather than just in the US and so whilst the US equities could remain firm, weakness in other countries like China and Germany will push oil prices down - win
If oil prices remain weak then Russia’s growth prospects fall - as already recognised in the recent World Bank downward revision of Russian growth for 2019 - win
I suppose one could also add the increased revenues to the US govt from the tariffs, but whether that is a win or not depends on who actually ends up paying the tariffs, the exporters or importer/consumers…
So is the use of economic sanctions a fair weapon in “shepherding” wayward countries,even the entire globe? Maybe, maybe not - but be prepared for more of the same…