Implications of Robert Lighthizer's Absence in Trump Administration

Reports suggest that Robert Lighthizer may not assume a role in the upcoming Trump administration, a surprising turn given his key role in shaping tariff strategies during Trump’s first term.

In a recent note, Deutsche Bank strategists discussed the potential implications of Lighthizer’s absence, emphasizing Trump's recent remarks on tariffs.

Despite Lighthizer's likely absence, Deutsche strategists assert that tariffs remain “likely.” President-elect Trump reiterated his belief in tariffs' effectiveness during a recent NBC interview, threatening to increase them on key trade partners such as Mexico, Canada, China, and the BRIC nations.

Jamieson Greer, Trump's selection for U.S. Trade Representative, along with Peter Navarro, appointed as Senior Counselor for Trade and Manufacturing, are seen as advocates for strict trade policies.

Matthew Luzzetti and his team anticipate the introduction of more tariffs, regardless of Lighthizer's involvement. However, Trump’s economic team composition suggests a more tempered approach to tariffs. Treasury Secretary nominee Scott Bessent supports a strategic application of tariffs, while Commerce Secretary nominee Howard Lutnick sees tariffs as a “bargaining chip” to reduce trade barriers for U.S. exports.

Consequently, there may be voices countering extreme views on trade, signaling that the universal baseline tariff could be at risk. The absence of Lighthizer might suggest a possible softening of U.S. trade policy in the eyes of markets and trade partners, although Deutsche Bank believes Trump will want to avoid sending such a signal.

To maintain a firm position, strategists expect Trump may amplify his rhetoric concerning tariffs, underscoring their significance in his administration's agenda. The recent tariff threats against Canada, Mexico, and the BRIC nations exemplify this strategy.

Without Lighthizer's aggressive tariff approach, the economic outlook might experience some advantages. A less confrontational tariff policy could mitigate the risk of a substantial supply shock, leading to better growth and inflation distribution outcomes, albeit marginally.