The real problem is that no one knows where it will endby George Magnus / July 16, 2018 / Leave a comment
No one should be in any doubt now that President Donald Trump is serious about waging a trade war. He thinks that China, the European Union and his northern and southern American neighbours are using trade to exploit the United States, and that the World Trade Organisation can be threatened or preferably, neutered.
While the UK isn’t centre-stage in Trump’s jaundiced view about how the world’s trading system works, Brexiteers should have known not to trust the US President, and over the weekend he devastated their hopes. But the problem goes far wider. Trump has already put at risk or threatened about $1 trillion, or roughly 7 per cent, of world trade. This is still escalating, and the consequences could be deeply troubling.
Trump fired the first trade salvo at the start of the year with tariffs on about $10bn of imports of washing machines and solar panels. Next came the implementation of 25 and 10 per cent tariffs on $50bn of steel and aluminium imports, respectively. These affected mainly Canada, Brazil, Mexico, South Korea, Japan and the EU. Following warnings and investigations, on 6th July, the first $34bn of a $50bn list of several hundred products from China were subjected to a 25 per cent tariff, with the rest coming into effect soon. These goods were selected under trade legislation specifying “national security” and aimed at China’s technology capacity and its industrial policy, called Made in China 2025.
Because China retaliated against the US measures, as it said it would, the White House issued last week a further list of 6,000 imported products, valued at $200bn, on which it proposed to levy a 10 per cent tariff after a review period, and commencing probably around October. Most of these products fall into the electrical and machinery categories and the plan is also aimed at Made in China priority sectors, but consumer products, such as furniture and vehicles are also included.
Higher tariffs on $250bn of imports from China would cover half of all US imports from that country, and just under 9 per cent of all US imports. Assuming that China retaliates in ways yet to be determined, the US has threatened to subject a further $200bn of imports from China to higher tariffs. This would mean nearly all $505bn of imports into the…