USTR Report Points to China and Europe as Next Trade Targets

April 2 may mark peak trade tensions, but the path forward remains highly uncertain, supporting our underweight on risk assets and industrial commodities. The USTR’s long-awaited report on trade barriers will guide the next phase of US trade policy. While the report only contains a total of 13 pages on Canada and Mexico, suggesting tensions there may be resolved quickly, China and Europe dominate the focus with 48 and 34 pages, respectively. These figures offer a proxy for where the next trade fights are likely to escalate.

We expect “Liberation Day” to mark the presentation of maximalist US demands, framing the opening salvo in a new round of trade negotiations. A shift in US trade focus toward China and Europe will only increase global policy uncertainty as the rules of international trade are rewritten. Even if markets find relief in the near term, global risk assets are not priced for a prolonged period of trade-driven instability.