Investing.com -- Tariffs will remain a key element of U.S. trade negotiations, serving as leverage in securing broader bilateral agreements, according to Bank of America analysts.
"We continue to see tariffs as a tool to extract concessions in comprehensive bilateral deals," BofA wrote, adding that this strategy does not preclude the actual imposition of tariffs.
BofA anticipates a "block-by-block approach" to trade, with varying policies toward different economic regions.
The firm does not expect permanent tariffs on Canada and Mexico but foresees a renegotiation of the U.S.-Mexico-Canada Agreement (USMCA) focused on "toughening rules of origin, screening of Chinese investments, and tightening of border control."
In contrast, they believe negotiations with the European Union will likely target "specific sectors (e.g. autos), energy, and defense spending."
Tariffs on China, however, are expected to remain a fixture of U.S. trade policy. "The objective continues to be geopolitical and economic decoupling," BofA noted, adding that while tariffs on China will likely be permanent, they may be lower than the 60% proposed during the campaign.
Other Asian economies, including India, Japan, Korea, and Vietnam, are also viewed as potential tariff targets.
Reciprocal tariffs are set to begin in April, rather than immediately, "opening room for negotiation, in line with our core views," according to BofA. Emerging economies such as India and Brazil are expected to be most affected, though Japan and the EU could also face pressure.
Despite the aggressive use of tariffs, BofA cautions that they will not resolve the U.S. current account deficit. "The current account deficit is a macroeconomic imbalance," the firm stated, emphasizing that addressing fiscal policy, rather than trade barriers, would be necessary to correct it.