Trump issues challenge to trading partners: Bring down barriers or face 'reciprocity'

Key Points
  • Trump demanded that all U.S. trading partners lower barriers, or be faced with reciprocal trade penalties.
  • "Trade must be fair and no longer a one way street!" the president exclaimed.
BIS: Trade war fear is already stopping investment
BIS: Trade war fear is already stopping investment

President Donald Trump issued a stark warning to the United States' trading partners on Sunday, calling on global economies to end all protectionist barriers or face a new round of retaliatory measures.

As fears mount over a trade war between the world's largest economy and major trading partners like China and the European Union, Trump renewed his call for "fair trade" that reduced barriers to entry. On Twitter, the president insisted that "all countries' with protectionist measures must remove those barriers, or be met with "reciprocity" by the U.S.

The United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street

Trump's doubling-down on his protectionist rhetoric comes in the midst of an ongoing fight that has seen retaliatory tariffs slapped on a wide range of goods between the U.S. and its erstwhile economic allies.

Last week, markets were roiled by rising tensions between the U.S. and China, which weighed heavily on stocks and sparked fears of an economic downturn. The Trump administration slapped 10 percent tariffs on $200 billion worth of Chinese goods, a move that prompted Beijing to ease credit conditions to cushion the blow. Separately, The Wall Street Journal reported on Sunday that the administration is preparing to bar many Chinese companies from investing in U.S. technology firms, and blocking American tech exports to the world's second-largest economy.

In the wake of an acrimonious split with NAFTA trading partner Canada earlier this month, the president denounced fair trade as "fool trade" without full reciprocity. Trump's increasingly trenchant rhetoric has called into question the relationship between the U.S. and many of its closest historical allies.

"A trade war wouldn’t be enough to push the economy into recession but...it would worsen the downturn we expect next year," Capital Economics said last week, in a research note to clients. The firm also cited the risk of higher prices being passed along to consumers, as a result of the tariffs making their way through the real economy.