Investing.com -- Reports last week suggested that Robert Lighthizer might not be taking on a role in the upcoming Trump administration. This development was unexpected, given that Lighthizer was a key figure behind the tariff strategies introduced during Trump’s first term and shared the President-elect’s firm stance on trade negotiations.
In a recent note, Deutsche Bank (ETR: DBKGn ) strategists have discussed the potential implications of Lighthizer’s absence, placing it within the broader context of Trump’s recent statements on tariffs.
First of all, despite Lighthizer's likely absence, tariffs remain “likely,” Deutsche strategists note, with President-elect Trump reiterating his belief in their effectiveness in a recent NBC interview.
Trump has threatened to increase tariffs on key trade partners, including Mexico, Canada, China, and the BRIC nations. Jamieson Greer, Trump's pick for U.S. Trade Representative, and Peter Navarro, appointed as a Senior Counselor for Trade and Manufacturing, are both seen as proponents of stringent trade policies.
“We therefore continue to anticipate that more tariffs are coming, with or without Lighthizer,” strategists led by Matthew Luzzetti said in a note.
Still, the composition of Trump's economic team suggests a nuanced approach to tariffs. Treasury Secretary nominee Scott Bessent has advocated for a strategic application of tariffs, while Commerce Secretary nominee Howard Lutnick views them as a “bargaining chip” to lower trade barriers for U.S. exports.
“Thus, while tariffs may be coming, there will be voices in the room that will act as meaningful counterweights to hawkish inclinations on trade. We would view the universal baseline tariff as most at risk here,” strategists noted.
The absence of Lighthizer might be interpreted by markets and trade partners as a softening of the U.S. trade policy. According to Deutsche Bank, “Trump is unlikely to want to send that signal.”
To maintain a firm stance, strategists said Trump may increase the rhetoric around tariffs to emphasize their importance in his administration's agenda. The recent threats of heightened tariffs on Canada, Mexico, and the BRIC countries serve as examples of this approach.
Without Lighthizer's maximalist tariff strategy, strategists believe the economic outlook could see some benefits.
A less aggressive tariff policy from the outset might reduce the risk of a significant supply shock to the economy. Consequently, the bank sees an improved distribution of growth and inflation outcomes, albeit marginally.