The megalomaniac US president recently announced 25 percent tariffs on steel and 10 percent on aluminum, mainly affecting formidable US trade partners like Canada, Mexico, China and European Union. The announcement has stirred hornet’s nest everywhere, with top analysts questioning the wisdom behind such a move.
Trump has imposed tariffs on $50 billion dollar worth of Chinese goods, accusing Beijing of stealing intellectual property. He also seeks to assuage the trade deficit with China, a country he has frequently accused of unfair trade practices.
In response to Trump’s decision, China announced its own tariffs of $35 billion worth of American goods, sending a strong message to Washington that it will not accept bullying or threats lying down. Now, we have two of the world’s largest economies locked in an acrimonious trade war.
European Union, stung by Trump’s trade war, imposed its own tariffs on US goods – around $3.2 billion worth of goods exported to 28-member bloc. The 25 percent tariffs have been imposed of commodities like whiskey, tobacco, Harley Davidson motorcycles, cranberries, peanut etc.
Interestingly, European Union played its cards well by targeting products to hurt Republican voters, and jolt Trump's party ahead of November midterm elections. Recently, Trump had a tense face-off at the G7 summit, where the US refused to sign an accord with leaders of the world's most advanced economies.
Following European Union’s retaliation, Trump again took to Twitter to give vent to his frustration. He threatened to escalate trade war between the US and EU by slapping 20 percent tariff on European cars. The threat was made the day EU reprisals took effect against US tariffs on European steel and aluminum.
Meanwhile, Turkey and India have also initiated their own trade war against US, imposing tariffs worth millions of dollars on products imported from that country. India has announced tariff amounting to $235 million on 29 American goods which includes agricultural products, steel and aluminum, sending a strong message to Washington.
Likewise, Ankara has imposed $266.5 million worth levies on US imports covering automobiles, coal and numerous other food products, in response to the “ill-advised” and “unsupportable” extra steel tariffs imposed by Washington, Turkish Economy Minister Nihat Zeybekci said.
For a large and economically diverse United States, these macro shocks have complex consequences on domestic and global level. Trump may not see the reason in this but these short-sighted measures might bring short-term relief to the US but in the long-run they would do very deep and irreversible damage to them. As the tariff will increase, the price of US products exported to other countries will jump, consequently the demand will fall and US firms will suffer. On the other hand, the US consumer will bear the maximum brunt of it, as prices will jump.
A report released recently pointed out that these American trade penalties and reaction to them from other countries would initially increase the number of jobs in steel and aluminum industries by almost 27,000 over the next one to three years. However, those gains will be directly minimised by reduction in generation of about 430,000 jobs throughout the country. To be precise, as the report hints, for every job created in steel and aluminum industries, there will be 16 jobs lost in other industries. You can count the losses.
The writer is pursuing Masters in Islamic Finance at Ahlulbayt International University in Tehran. He can be reached at turi.ishtiaq@gmail.com
MNA/TT
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