Deutsche Bank takes a crack at decoding Trump’s strategy

FX analysts at Deutsche Bank today highlight three political developments:

• The WaPo article highlighting a narrowing of tariffs (and Trump’s denial)
• Trump’s preference for “one big beautiful bill”
• Trump’s plan to finance tax cuts with tariffs

This year will defined in large part by
the policy mix that is
delivered by President-elect Trump, DB writes but they don’t think we will get a Republican bill until April/May that covers the border and taxes.

They note that the news highlights:

• Advanced preparation for tariff policy.
• Likely use of Section 232 (S232) investigations for sector-specific tariffs.
• Expectation of multiple tariff approaches, including legislative and executive actions to come later

They also point out that by using national security tariffs in this way, Trump may try to use broad tariffs via legislation.

“There is
an implicit desire to enshrine tariffs in legislation, because that is the only
way the revenue can be scored by the CBO as part of the reconciliation process.
We have long been highlighting the two PNTR China bills that
are currently sitting in Congress as the ones to watch in terms of legislative approach, beyond the S232 discussion of the
Washington Post article above.”

That indicates multiple policies and timelines around different tariffs, which adds to the complexity of navigating them and highlights multiple risks. On the fiscal side though, they see the updates as dovish at the margins.

This article was written by Adam Button at www.forexlive.com.