The departure of President Trump’s chief economic adviser Tuesday sent the after-hours stock market plunging, rattled foreign capitals, and raised the risk that the United States, after 70 years of cheerleading free trade, is turning its back on the idea.

Until now, nations and companies have brushed aside the president’s support of aggressive trade barriers, reasoning that business-minded advisers would moderate any harsh moves by a divided administration. That changed with the resignation of Gary Cohn, the highest-ranking free-trader inside the White House.

No one can avoid Mr. Trump’s tough trade talk anymore. It now seems a given that he will announce broad tariffs against imported steel and aluminum. And given the reaction from trading partners, it also appears likely they will retaliate with similarly sized tariffs against US goods.

The big question is what happens after that. So far, the market reaction reflects a sense of heightened risk, rather than panic. And many CEOs don’t disagree with Trump that foreign trade partners often take advantage of America. But where Trump sees provocation as a tool toward fairer trade, corporate America sees uncertainty and hazard. Whether it’s a Republican or Democrat in the White House, businesses often prefer caution and global engagement to brinkmanship when it comes to trade.

“The fact that you can paint so many scenarios is not a positive thing,” says Mark Zandi, chief economist of Moody's Analytics, a risk-management subsidiary of Moody’s Corp. in New York. “Business people get awfully nervous when they don’t know the rules of the game and how those rules may change. Investors, the same way.”

Gains from tax cuts 'could be erased'

On Wednesday, the Dow Jones Industrial Average seesawed dramatically before closing down 0.33 percent, following a down day in Asia but a rise in several European markets.

Some specific companies and labor unions have cheered Trump’s willingness to pressure trade partners by putting up tariffs and other trade barriers.

But the US Chamber Commerce warned in January against letting the North American Free Trade Agreement fall apart, let alone risking a wider trade war.

“The economic gains we’re seeing from regulatory relief and tax reform could be erased if we do not stand up for and protect free, fair, and reciprocal trade around the world,” Thomas Donohue, the Chamber president, said in a statement after Trump’s State of the Union address. “It’s clear that if the US isn’t leading on trade, we’re falling behind.”

A question is whether Trump accepts that notion, and whether any advisers can sell him on it. In the 1990s, Wall Street types like Robert Rubin and Lawrence Summers had President Bill Clinton’s ear, sometimes to the consternation of organized labor. More recently, George W. Bush surrounded himself with former Fortune 500 CEOs, and President Barack Obama leaned on Mr. Summers and others who were more globalist than America-first in mind-set.

Now, with Cohn departing, Treasury Secretary Steven Mnuchin (like Cohn a Goldman Sachs alum) remains as a prominent Trump official who is more attuned to concerns of Wall Street and corporate boardrooms.

Trump himself, though a New York business person, seems closely aligned with the get-tough trade views of other advisers including Peter Navarro on the White House staff, US Trade Representative Robert Lighthizer, and Commerce Secretary Wilbur Ross.

If multinational firms have scored wins with Trump on tax cuts and deregulation, the trade issue is turning into a trouble spot, or at least a wild card. Many CEOs are aware of history, that a trade battle can as easily turn into an era of protectionism as a quick victory.

“Businesses by the nature of them tend to be multilateral” in outlook, says Ed Yardeni, who heads an investment strategy firm near New York. “They have interests all around the world and have to deal with politicians all around the world.”

Private sector wondering, which scenario?

Traders and foreign policymakers are looking at three possible scenarios:

Trump backs down from broad-based tariffs on steel and aluminum and, instead, targets them at China and other nations that are helping it dump steel. This is the least disruptive scenario, because it lessens the risk of an all-out trade war, but it is also highly unlikely, analysts say. The president follows through on broad-based tariffs and affected nations either don’t respond or retaliate with similar-sized tariffs on US goods. Either way, the White House declares victory and the dispute doesn’t widen. Analysts say that relative to the size of the economies of the nations involved, it would have only a small economic impact. The steel and aluminum tariffs would cost other nations $14.2 billion per year in trade losses, with Canada ($3.2 billion) and the European Union ($2.6 billion) feeling the biggest pinch, according to Chad Bown, a senior fellow at the Peterson Institute for International Economics. That’s a drop in the bucket for them. If all the affected nations retaliate proportionally, hitting, say, blue jeans or agricultural products, the net job loss in the US could be 100,000 to 150,000 jobs, estimates Mr. Zandi. In an economy used to creating 200,000 jobs in a month, such losses are manageable, he added, speaking on a conference call with reporters Wednesday. The trade dispute over steel and aluminum escalates into a full-blown trade war. This is the big risk, and it could happen, for example, if Trump responds to European Union tariffs with new tariffs on cars. Even if he doesn’t, some analysts and, increasingly, corporations and investors, worry that this is just the first step toward a much more protectionist stance by the US and possibly other nations. That could involve much larger losses of sales and jobs for economies around the world.

The most likely scenario, according to many analysts, is some version of No. 2, although Trump isn’t likely to stop pushing on trade.

“I think he's going to push forward on trying to get fairer deals,” says Mr. Yardeni, an economist. “He's not wrong about foreigners taking advantage of us. The question is whether these violations are significant enough to warrant risking a trade war.”

The president himself has played down those risks. Last week, he tweeted: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.”

What might be stoking his confidence?

For one thing, the stakes in the current dispute are relatively small: both in terms of trade and jobs. The economy won’t come to a sudden halt over steel and aluminum tariffs.

Less to lose in a trade war, but

For another, the US has less to lose in a trade war. Of all the major trading nations, the US economy is one of the least reliant on foreign trade. Imports and exports make up only 29 percent of its GDP, only slightly higher than Brazil and similar to Japan, according to 2010 data compiled by the St. Louis Federal Reserve Bank. Almost every other major power is much more reliant on trade, including all of Europe, Canada, Mexico, China, Russia, and South Korea.

The administration may be gambling that those nations will come to terms on trade because they have more to lose.

“When Trump says trade wars are easy to win, he's basically flexing his muscle,” says Yardeni. He may now be staking out aggressive positions for negotiations to come.

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But nations don’t always behave rationally.

“Things unravel,” says Zandi of Moody's Analytics. “There are political dynamics involved. We went down this path in the early '30s with Smoot-Hawley [the tariff act endorsed by President Herbert Hoover] and it didn’t work very well for anybody. Hopefully, we’ve learned that historical lesson.”