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Gary Cohn's exit stokes fears that Trump will fight a trade war

Gary Cohn's sudden resignation as President Donald Trump's top economic adviser has rattled Wall Street, stoking fear...

Posted: Mar 7, 2018 6:41 AM
Updated: Mar 7, 2018 6:41 AM

Gary Cohn's sudden resignation as President Donald Trump's top economic adviser has rattled Wall Street, stoking fears the US could fight a trade war.

Trump's plan to slap steep tariffs on all US imports of steel and aluminum appears to have been the last straw for Cohn, a former Goldman Sachs banker and free trade advocate.

Experts fear his departure removes a key restraining influence in the White House and could be followed by tougher moves against China, and the collapse of the North American Free Trade Agreement.

"There is now no one with the ear of the president who is a supporter of the existing trade system," said Edward Alden, a senior fellow at the Council on Foreign Relations who specializes in trade and economics. "Trump will likely feel liberated by this, but it will only reinforce his own protectionist convictions."

Related: The biggest thing Trump gets wrong on trade

The president's moves on trade so far this year have brought US policy closer to his aggressive campaign rhetoric that accused China and other countries of unfairly taking advantage of the US.

His announcement on steel and aluminum tariffs drew protests from major trading partners like the European Union and Canada, as well as criticism from some American business leaders.

Cohn's exit leaves Trump's trade policy largely in the hands of far more hawkish figures including Trade Representative Robert Lighthizer and adviser Peter Navarro. Both of them have singled out China's approach to trade as unfair and argued in favor of using tariffs to press for a change in its behavior.

An increase in trade tensions is "close to inevitable," said Alex Wolf, a Hong Kong-based economist at investment firm Aberdeen Standard Investments. Cohn's exit makes Trump more likely to indulge the views of his more protectionist advisers, he added.

The planned steel and aluminum tariffs aren't targeted at a specific country and are expected to hit exports from countries including Mexico, Canada, China and Brazil.

The EU has already threatened to retaliate with its own tariffs on imports of American products including Harley Davidson motorcycles, Levi's jeans and bourbon whiskey.

Related: 'Trade wars are good?' Two words: Great. Depression.

Trump will have the opportunity to go after China directly when he reviews the results of an investigation led by Lighthizer into alleged Chinese theft of US intellectual property. It could result in heavy restrictions on Chinese investment in the US and tariffs on a wide range of products.

Cohn's resignation "increased the risk tenfold that President Trump will follow through with far-reaching trade tariffs," said Stephen Innes, the head of Asia-Pacific at currency trading firm Oanda.

Aberdeen's Wolf thinks China could respond by making life harder for American companies doing business in its huge market.

"US multinational sales in China are significant and it's a large source of growth," he said. "The risk is what does China does in regard to market access for the likes of Apple, Microsoft and Starbucks."

Related: Why steel and aluminum tariffs matter to the US economy

Cohn's departure also comes as negotiations over NAFTA, the agreement that links the US, Canadian and Mexican economies, reach a critical point. Trump has slammed NAFTA as the worst trade deal in American history and repeatedly threatened to kill it.

He said this week that tariffs on steel and aluminum would only be removed if Canada and Mexico concede to his demands on a new deal, an approach experts say is likely to hamper the NAFTA talks.

In a call with Trump on Monday, Canadian Prime Minister Justin Trudeau "emphasized that the introduction of tariffs would not be helpful to reaching a deal on NAFTA," according to a statement from Trudeau's office.

Without Cohn arguing in favor of free trade inside the White House, the risk of the negotiations going awry appears to have increased.

"We're in for a fairly turbulent period, I fear," said Alden, the Council on Foreign relations expert.

-- Matt Egan and Jethro Mullen contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 314509

Reported Deaths: 7247
CountyCasesDeaths
DeSoto21626259
Hinds20359415
Harrison17934309
Rankin13634278
Jackson13447246
Madison10099217
Lee9980174
Jones8381163
Forrest7683152
Lauderdale7191241
Lowndes6401147
Lamar623086
Lafayette6200118
Washington5339134
Bolivar4802132
Oktibbeha462798
Panola4588107
Pearl River4512146
Marshall4443103
Warren4393121
Pontotoc420772
Monroe4113133
Union411076
Neshoba4031176
Lincoln3968110
Hancock379386
Leflore3497125
Sunflower336090
Tate334084
Pike3325105
Scott315973
Alcorn313368
Yazoo311669
Itawamba300477
Copiah297065
Coahoma295479
Simpson295288
Tippah288768
Adams286882
Prentiss279760
Marion269280
Leake268373
Wayne262641
Grenada261487
Covington259681
George248048
Newton246861
Winston227281
Tishomingo226967
Jasper221148
Attala214473
Chickasaw207857
Holmes189173
Clay185454
Stone182833
Tallahatchie178841
Clarke178080
Calhoun170832
Yalobusha164338
Smith162434
Walthall133945
Greene130633
Lawrence128624
Montgomery126942
Noxubee126734
Perry126338
Amite123142
Carroll121829
Webster114532
Jefferson Davis107133
Tunica105726
Claiborne102430
Benton99525
Humphreys96733
Kemper95828
Franklin83823
Quitman80916
Choctaw76418
Wilkinson67331
Jefferson65728
Sharkey50217
Issaquena1686
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Alabama Coronavirus Cases

Cases: 532895

Reported Deaths: 11001
CountyCasesDeaths
Jefferson771431528
Mobile41089808
Madison34837505
Tuscaloosa25810454
Montgomery24355588
Shelby23730249
Baldwin21191309
Lee15892171
Calhoun14522316
Morgan14324279
Etowah13861353
Marshall12250223
Houston10581281
Elmore10060205
Limestone9986151
Cullman9705194
St. Clair9702243
Lauderdale9441242
DeKalb8846187
Talladega8255176
Walker7246277
Autauga6938108
Jackson6815112
Blount6694137
Colbert6310134
Coffee5524119
Dale4850111
Russell443238
Chilton4308112
Franklin426282
Covington4136118
Tallapoosa4039152
Escambia393977
Chambers3578123
Dallas3557152
Clarke351161
Marion3130101
Pike311377
Lawrence300798
Winston275673
Bibb261564
Geneva251477
Marengo249664
Pickens234761
Barbour231756
Hale223277
Butler216469
Fayette212562
Henry189044
Cherokee184745
Randolph181742
Monroe178040
Washington167639
Macon159950
Clay156857
Crenshaw152757
Cleburne149141
Lamar142935
Lowndes139053
Wilcox127130
Bullock122841
Conecuh110629
Coosa107928
Perry107826
Sumter104832
Greene92534
Choctaw61124
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