Will the impact of trade war, ignited by the US between large industrial countries, extend to the rest of the world? This is a question raised in many international circles as global criticism of the Customs tax policies of the US government under Trump administration is expanding. Will this really be in the interest of the United States under the trade freedoms guaranteed by World Trade Organisation (WTO)?
Trump’s decision prompted several countries to condemn the Customs tariffs he announced on import of steel and aluminium from the EU, Canada, Mexico and fees he wants to impose on Chinese commodities. This drove leaders of the countries concerned to take similar actions on US exports to their countries of steel and other goods and products. European leaders believe such a decision is “illegal” and warned that the EU will respond in a “strict and appropriate manner”.
The US, on the other hand, believes that negotiations with the EU, Canada and Mexico did not progress as expected, which allows it to impose 25 per cent of levied fees on steel and 10 per cent on aluminium, noting that negotiations are welcomed at any time.
Meanwhile, European countries looked at how to respond to these new US measures. The EU issued a list of US commodities to be subject to tariffs in response to the US decision, and is planning to bring a case against the US in the WTO.
As for Canada, it is in the process of imposing a tariff of 25 per cent on US exports worth $13 billion as of July, including steel, dairy, alcoholic beverages and coffee, while Mexico intends to impose tariffs on American export of steel, pork, apples and cheese.
China criticised Washington’s intention to impose Customs duties on its metals, stressing that any future trade war with the US in light of these concerns means disaster for the global economy which will not only affect China, but also the US and the world.
The Chinese parliament stressed that China can deal with any challenges ahead, and that it will fiercely protect its business interests. These developments come after the US President’s previous announcement to impose Customs duties to the tune of 25 per cent on Chinese imports worth $50 billion annually. This prompted China to respond by imposing “equal fees with equal force”, spelling the beginning of a trade war between the world’s two strongest economies.
Some analysts believe the decision to impose tariffs on Chinese imports will actually limit the flow of Chinese goods to America, affect some Chinese industries and ease trade deficit between the two countries. However, it is not in the interest of the US on the long run, especially at the political level, not to mention it is against its economic policies based on capitalism, freedom and economic globalisation.
Since World War II, statistics show the growth of the global economy is linked to free trade and this freedom led to the emergence of the WTO, which expanded the horizons of world trade by removing trade barriers between countries worldwide, boosted the growth of global investment and paved the way for new innovations and technologies.
Until recently, the world did not expect trade block to originate from a large industrial country like the US, but it seems that the world’s largest economy wants to abandon free trade.
Many studies confirm that economic protection ultimately leads to reduced employment and higher prices for consumers. The threat of new tariffs will inevitably lead to imbalance in global trade because free trade has many benefits, including lower consumer prices, more job opportunities, as well as reducing the cost of imported goods and reducing poverty across the globe.