During the last month, the Trump administration has caused several amounts of controversy due to the “trade wars” between the U.S. and its G-7 allies and China. The U.S. is prepared to implant tariffs in said countries due to “unfair” trade deals and national security issues, and each country involved has stated that it could potentially retaliate with counter-measures. Recently, President Donald Trump decided to increase the amount of Chinese goods that would be affected by the measures, from 50$ billion of worth to 200$. Even though many of these measures have not actually been put into use, as his administration is preparing for future procedures. However, the mere concept of having a tariff-to-tariff trade war is so concerning that it has already created an impact on global economy.
As reported by the New York Times, transportation for exports all around the world have been slowed down and orders in factories stopped. Investors have also decreased their interest, as U.S. stocks and trade businesses have become a risky bet for them.
American farmers have also been significantly affected by the conflicts, as their exports are now more expensive and with a smaller audience. More specifically, exports of U.S. pork to Mexico have significantly decreased, as the latter country reacted to the upcoming tariffs with a counter-measure. This was particularly concerning, since Mexico was the second biggest buyer of American pork and specifically purchased the animal’s legs, which means that said specific raw product will be left in farms.
Short after the application of tariffs in Canadian alluminium and other metals, orders for said products were cancelled and their transportation was affected. Owners of metal-production companies have stated that the change in their businesses was felt immediately after the implantation. In other regards, Canadian citizens have started a campaign on Twitter to boycott American products after tensions raised between U.S. officials and Prime Minister Justin Trudeau.
Germany has shown itself to weaken in face of trade wars, as many investors have withdrawn their investments in German banks. However, Germany’s Chancellor Angela Merkel has taken the lead between European countries and stated that they are already thinking on ways to retaliate to Trump’s measures. She also stated that, while the U.S.-Europe relations are not completely dismantled, its countries will try to not rely on its former ally for future businesses.
Businesses, in general, are already getting ready for an impact from tariffs, even if they have not been applied yet, and are already seeing some effects in their income. Especially regarding aircraft traffic and container ships, the decrease in interest and use has been very prominent throughout the last couple of weeks.
Managing director of the International Monetary Fund, Christine Lagarde, spoke up about the potential dangers of trade wars as a concept. She said: “Let us not understate the macroeconomic impact. It would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe and Germany.”
This whole process has yet not confirmed whether Trump’s negotiating skills are effective or not, as it was believed that these procedures may just be a context to put pressure on allies and get better trade deals. However, with the recent development with the China-related trade tensions, it is unclear whether the president’s intention is to actually follow with trade wars instead of negotiating, which has been proposed several times by Chinese officials.
The president has persistently framed the trade wars as something necessary for fair deals with other countries and to boost the American economy. The amount of thought that he has given to this approach is quite questionable, since many of the affected imports are used in U.S. factories for production, and therefore the U.S. economy would also be affected by the tariffs. Another concerning aspect of his measures is that many American companies have factories in China, which could be affected by the tariffs and end up hurting the status of the U.S. companies themselves. This, alongside increasing tensions in Wall Street and foreign investments in the U.S., are hurting Trump’s own economy in ways that were certainly not planned and at a cost that will not pay off or be worth it in the future.