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The Protectionists Are Coming: Assessing The Fallout From Gary Cohn's Resignation

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The Protectionists Are Coming: Assessing The Fallout From Gary Cohn's Resignation

Less than a week after President Donald Trump announced new tariffs on steel and aluminum imports, National Economic Council director and free trade advocate Gary Cohn announced his resignation. Investors were certainly disappointed with Cohn’s departure, sending the Dow lower by more than 160 points Wednesday morning.

Not only did Wall Street lose an inside presence in the White House — Cohn was a former COO of Goldman Sachs (NYSE: GS) — Height Capital Markets analyst Clayton Allen said Wednesday that Cohn's potential replacement could be bad news for U.S. investors hoping to avoid an international trade war.

“While Cohn does not plan to depart for several weeks, a diminished role in the near term creates a void that opens the door for protectionist advisors like Peter Navarro to increase their stature and influence,” Allen said. 

The White House has lost its loudest free trade advocate at a critical time ahead of the expected release of tariff details, which could come as soon as this week, according to Height Capital Markets.

Investors should expect the initial tariffs to be blanket regulations on all major U.S. trading partners and include an explanation of a potential individual appeal process, Allen said. 

“We foresee a process whereby nations are included in the original tariff structure and only exempted later as a possible option, which is in keeping with our broader view that Trump seeks to use tariffs as a bargaining tool,” the analyst said. 

Both China and the EU have threatened to retaliate against U.S exporters in the wake of the new tariffs. Since the tariffs were announced March 1, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 0.1 percent.

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