People were shocked when President-elect Donald Trump didn’t re-nominate Robert Lighthizer as U.S. Trade Representative. Lighthizer would have been in charge of trade talks with countries like China and Mexico.
Markets continue to play down the danger of new tariffs on U.S. imports. They may see the fact that Lighthizer, a known hardline protectionist, wasn’t nominated as proof that tariffs will only be used as a bargaining chip and not as a permanent policy of the administration.
New stories, though, say that Trump didn’t choose Lighthizer because he wasn’t pro-tariff enough for the job.
CNN reported on Sunday that Trump told his friends that he didn’t give Robert Lighthizer a cabinet job because he’s “too scared to go big.” “I trust him, but he’s too shy to make big, risky moves.”
This likely means that Trump’s choice for the job, Jamieson Greer, who used to be Lighthizer’s chief of staff, will be ready to make those risky moves.
Tobin Marcus, a policy analyst at Wolfe Research, wrote in a Tuesday client note, “Trump’s decisions about personnel make us even more sure that the tariff threat is real.”
Marcus also said that Greer’s nomination for USTR “is a China hawk” and that he thought the average rate of import tariffs on Chinese goods would go from about 10% now to 30%. He also thought that the average rate of import tariffs on goods from the rest of the world would go up by 4 to 5 percentage points.
It seemed like Lighthizer was one of the less extreme views on trade during the first Trump administration in his 2023 book called “No Trade is Free.”
He wrote that at the start of Trump’s first term in office, some of his staff wanted to “simply tear up” the North American Free Trade Agreement (NAFTA) between the US, Mexico, and Canada. Trump had been against NAFTA for a long time.
“Even though I was against NAFTA, I was not in favor of ending it,” Lighthizer wrote. He also said that he had told Trump to change the agreement, which was eventually done with the approval of the USMCA trade deal in 2018.
If Lighthizer isn’t at the USTR office on Monday, Henrietta Treyz, director of economic policy at Veda Partners, said in a note that the Trump administration will be less loyal to the enforcement mechanisms set up by the “phase-one” trade deal that Lighthizer negotiated with China and Trump signed in January 2020.
For investors, this means that China could face tariffs months before planned, Treyz said.
China hasn’t kept its promise to buy more agricultural goods from the U.S., and it hasn’t done a great job of stopping intellectual property theft and forced technology transfer. According to Treyz, the Trump administration will have several reasons to raise taxes on Chinese goods as part of that deal.
“However, if Lighthizer isn’t there, the first thing that could go wrong with the phase-one trade deal is the timeline set by the enforcement mechanism. This would mean that tariffs would go up months after Trump takes office, around April to June 2025,” Treyz wrote. “Tariffs could happen much sooner than markets and businesses expect if the U.S. were to back out of the [phase-one] trade deal.”
This week, Barclay’s analyst Venu Krisha said that Trump’s tariffs could hurt the materials (XLB -0.31%), consumer discretionary (XLY -0.19%), technology (XLK -0.00%), industrials (XLI -0.58%), and healthcare (XLV 0.11%) sectors because these businesses are “strongly dependent on global supply chains.”
But stocks in Europe (SX5E 0.66%) and China (SHCOMP 0.44%) have more to lose from new tariffs being put in place quickly and a more hostile U.S. trade policy, he wrote in a recent client note, especially since Trump wants to lower business taxes and loosen rules.
“Trump’s campaign promises would strengthen U.S. exceptionalism and help U.S. stocks remain more profitable and valuable than those in other countries,” he said. “Europe is likely to be hurt the most by Trump’s protectionism, and the continent doesn’t have strong political leadership to fix the structural problems that slow growth.”
