US futures (ES=F, NQ=F, YM=F) and European stocks are plunging as uncertainty around trade negotiations continues to weigh on the markets.
Michael Froman, president of the Council on Foreign Relations and former US trade representative under the Obama administration, joins Morning Brief to discuss the challenges of removing tariffs and how geopolitical dynamics complicate the US's standing globally.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Mike, it seems like the market is still holding on to some hope that there is negotiation here. If not, we might be seeing even more selling than we already are this morning. In your view, based on your experience in the room with these tariff negotiations in the past, where are the areas of negotiation? What are the metrics to get any of these tariffs removed?
So the best case scenario is that the president really intends to use this as leverage. And as Ursula von der Leyen just said, they're willing to negotiate. And there are barriers. The Europeans have higher tariffs on our products than we have on on theirs. There are a number of non-tariff barriers, issues that have been irritants in the relationship for a long time. Maybe some of those will be removed. That's the best case scenario. But every country has its own politics, and every politician needs to respond in a way that demonstrates that they're defending their the interests of their constituents. And so I expect to see retaliation. I expect to see escalation. And that once tariffs are put in place, they're very hard to get rid of because you have constituencies that then have a vested interest in keeping them. We saw that the Biden administration inherited a number of of tariffs that the Trump first Trump administration put on China. They reviewed them for three years and they didn't end up eliminating any. And so I think it's very difficult once tariffs are put in place to to eliminate them when constituencies get quite used to it.
Obviously, these are trade and economic measures, but what does it look like from a geopolitical perspective as well? What's the kind of bleed over, and what does it mean for the relationship? I mean, we already have seen obviously the relationship between the US and Canada, for example, fundamentally damaged. What about in terms of US standing in the in the world?
Well, it has a fundamental impact on the way we're perceived by not only foreign governments, but by foreign populations around the United States. You mentioned Canada. I think the Canadians are quite bewildered trying to figure out what they have done to deserve this approach by the administration, and what they need to do to get out of the doghouse. There are outstanding trade issues that they should resolve, whether it's around dairy, or softwood lumber, or digital services. So there are things to work on, but I think they feel like the US has really undervalued the relationship that's been built up over over decades, um, with many of these countries, sometimes over centuries, about around alliances. And I think that's the that's going to be very difficult to to reconstruct, because even if the tariffs come down, there's now a lack of trust with the US. And that's hard to demonstrate US leadership when our closest allies don't trust us.
