By David Fickling | Bloomberg May 31 at 2:14 AM
How far down the rabbit hole are we on U.S. trade policy right now?
Just a few years ago, the idea that British cars and Canadian steel could be considered a national-security threat to America would have been laughed out of the room – but here we are, with so-called Section 232 tariffs still threatened on European automobiles and only just removed on Canadian metal.
Things went even further through the looking glass late Thursday:
President Donald Trump’s tweet isn’t even the worst of it: The tariffs will rise by 5 percentage points each month to hit 25% in October if the situation isn’t resolved, according to a separate White House statement.
The legal justification is the situation on America’s southern border, where apprehensions of illegal entrants are around their lowest levels since the 1960s. This is apparently deemed a national emergency – but crackpot legal justifications are a dime a dozen these days. If you can argue with a straight face that an imported Fiat 500 is a threat to the safety of the republic, you can argue pretty much anything.
The real thing to worry about is what this outcome would mean for the Trump administration, and the wider ability of the U.S. to prosecute trade policy and diplomacy as a whole. Markets are, with justification, in a tizzy: The Mexican peso fell 2.1 % in a matter of minutes to its lowest level in nearly three months. Mazda Motor Corp., which imports all its cars sold in the U.S., slumped as much as 8% in Tokyo.
Clearly, any such move on tariffs would rip apart the complex web of manufacturing supply chains that crisscross the Mexican border,