Davos Seeing Raft of Trump ‘Unknowns’ Counsels Calm and Caution

(Bloomberg) — The global elite in Davos woke up Tuesday breathing a sigh of relief after President Donald Trump concluded his first day in office only talking about trade wars rather than starting any.

But just how long the world’s most effusive tariff salesman will hold fire is anyone’s guess — and the chief executives and investor class gathered in the Swiss mountain resort town are bracing themselves.

“Even when I was there eight years ago, there was always a heavy debate on tariffs — on the positives and the negatives of tariffs, on the intended consequences, unintended consequences,” Gary Cohn, IBM Corp. vice chairman and Trump’s former National Economic Council director, said Tuesday on Bloomberg TV. “Look, it’s day one of a four-year administration. You don’t have to put tariffs on day one.”

Cohn, who often was in the middle of bitter fights with the hawkish wing of the economic team in Trump’s first term, ended up resigning after the president used a sweeping national security statute to impose steel and aluminum tariffs on the entire world.

Trump’s pronouncement Monday night that he was “thinking” about putting tariffs of 25% on Mexico and Canada, possibly by Feb. 1, is leaving open the question how much this is a negotiating ploy to extract early concessions out of the nation’s top trading partners.

Surprisingly left off his initial hit list, for now anyway, was China. Trump struck a more collaborative tone toward Beijing and wouldn’t commit to imposing duties on the second-largest economy even after he promised it on the campaign trail.

A broad executive action on trade policy, however, set up studies for his Cabinet secretaries to assess compliance with various trade deals, including the phase one agreement Trump struck with Beijing that he’s often claimed China broke its commitment on.

Chinese Vice Premier Ding Xuexiang on Tuesday used the opportunity in his Davos address to pledge more openness and transparency. He also seemed to acknowledge the need to respond to Trump’s demands.

“We don’t seek trade surplus. We want to import more competitive, quality products and services to promote balanced trade,” Ding said, without naming any country. China has an overall low level of tariffs at 7.3%, he added. 

Former International Monetary Fund Deputy Managing Director Min Zhu — who is also an ex-People’s Bank of China deputy governor — said he wasn’t surprised that Trump refrained from imposing tariffs on China. “Fundamentally, there’s a lot of mutual interest between the US and China,” he said in an interview with Bloomberg TV.

European Central Bank Governing Council member Francois Villeroy de Galhau, the French central bank governor, said he is not too concerned about saber-rattling from Washington.

Not Too Worried

“If I look at our side of the Atlantic, I’m not very worried,” he told Bloomberg TV. “I am vigilant but not worried about inflation, including the effect of Mr. Trump’s policies. We will see the degree of possible retaliation but I would say that the perspective on inflation is quite assured.”

Nomura Holdings Inc.’s wholesale division chief Christopher Willcox said Trump’s tariff policies would be inflationary in the first year but could adjust over time.

“Intellectually, tariffs don’t have to be inflationary. If the tariff increases are matched by an increase in the dollar, that can offset the inflationary impact,” he said on Bloomberg TV.

Cohn said executives are going into the new year with “eyes wide open” on the potential challenges ahead and said the Trump team’s engagement with the business community can be an asset for companies.

“Everyone has a fairly good view of what’s going on in Washington,” he said. “Look, the one thing about the Trump administration is they’re very transparent.”

Still, he cautioned, there is a lot of room for pendulum swings.

“I always take Davos with a grain of salt. Everyone likes to be excited,” he said. “But ultimately we have to see what the year brings because there’s more unknowns than knowns in the equation.”

–With assistance from Rebecca Choong Wilkins.

(Adds comment from Chinese vice premier. A previous version of this story corrected the title of Min Zhu.)

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