President Trump tweeted Monday that he will restore steel and aluminum tariffs against Brazil and Argentina due to their currency devaluations.
"Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries."
The big picture: Trump's tweets show that he is not afraid to open a potential new front in his ongoing global trade war even as the 2020 presidential election approaches — and also touched on his antagonism with the Federal Reserve, which he said should lower rates to prevent similar actions from other countries.
Reality check: Both the Brazilian real and Argentine peso are freely traded and have been for years. The currencies have weakened because of political upheavals and dwindling growth forecasts in the two countries — not government intervention.
- In Argentina's case, the weak currency has been one of the biggest pain points for its citizens as its economy attempts to pull out of a lengthy recession. It has helped fuel spiraling inflation and erode buying power, putting one in three people in poverty, the highest level in close to a decade.
What they're saying: "Trump’s tweets suggest a failure to understand how trade flows, exchange rates, or economies function at the most basic level," Karl Schamotta, chief market strategist at Cambridge Global Payments, tells Axios.
- "His actions are completely counterproductive, and will only apply more pressure on both currencies, driving them down against the dollar, while damaging central banks which are doing their best to fight depreciation."
- "He is somehow managing to make human suffering worse in these countries — while also making U.S. economic leadership laughable."
Behind the scenes: A source familiar says that Trump is fighting Fed Chair Jerome Powell every day about a strong dollar. The president and Peter Navarro, one of his most hawkish trade advisers, claim that it is seriously "overvalued" and believe countries that are devaluing are trying to game the system.
- Trump is preoccupied with getting China to announce a massive purchase of U.S. agricultural goods. The same source says that "the agriculture part of the China deal is driving him mad."
- A former senior Trump administration official who worked on trade told Axios, "Can understand his frustration, but un-exempting minor metals tariffs isn’t going to do or change anything. It just betrays his emotional reaction and makes the U.S. position look weak."
- Brazil is America’s major global competitor to sell soybeans to China. And Argentina inked a deal earlier this year to export soymeal, a livestock feed, to China, per Reuters.