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Irony and Sadness


Today 11 Pacific nations are signing an ambitious trade pact that will increase their trade while also improving worker and environmental standards. It is ironic, and sad, that today President Trump will sign an order to apply 25% and 10% tariffs on most* imported steel and aluminum, respectively.

The United States is abandoning its post-WWII free trade agenda that has worked so well to preserve the peace while expanding prosperity, both at home and abroad. We fear that this change in US strategy will negatively impact the intrinsic value of companies globally, but particularly that of US companies. As an active, long-term investor, AlphaGlider has positioned its strategies accordingly.

William Mauldin and Paul Kiernan, reporting for The Wall Street Journal [firewall]:

Japan, Canada, Mexico and eight other Pacific nations are set to sign a new version of the Trans-Pacific Partnership, or TPP, on Thursday. The Trump administration, which is expected to announce as soon as today unilateral tariffs on global imports of steel and aluminum, pulled the U.S. out of the original TPP a year ago, fulfilling a promise in a 2016 election campaign dominated by skepticism about the benefits of global trade.

The goal of the pact is to open borders to more trade in the rapidly growing Asia-Pacific region and to set international standards, which many see as crucial to managing the encroaching dominance of China, the second-biggest economy in the region.

Officials involved said the pact shows some countries are eager to liberalize trade at a time when the Trump administration and some other governments are wary of economic integration. “It sends a message to the world that Mexico remains a country committed to free trade,” said Mexico’s Deputy Economy Minister Juan Carlos Baker.

American free-trade advocates were chagrined at the split-screen image expected later in the day Thursday: of U.S. allies signing a new trade pact while U.S. president unveiled new tariffs.

“While the TPP countries have today signed an agreement tearing down trade barriers, President Trump and his trade team are hard at work raising them,” said Daniel Price, a senior White House economic aide in the George W. Bush administration. “The U.S. is increasingly isolated,” he added. “Is this what winning looks like?”

The 11-member bloc, formally called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will have less than half of the economic impact of the original, according to economists who back the TPP, which also includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

*Numerous news outlets are reporting that Canada and Mexico will be initially exempted from these tariffs, but could be hit with them later if they do not provide concessions to the US in the current NAFTA renegotiations.


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