Attention has rightly focused on risk of actual war, but the harmful economic consequences of Trump’s action should not be overlookedby Duncan Weldon / May 10, 2018 / Leave a comment
The United States’s unilateral withdrawal from the Iran deal is a geopolitical disaster for the Middle East. But whilst most attention has, rightly and understandably, been focused on the potential for the deal’s unravelling to lead to actual war it also has the potential to seriously escalate the developing trade war. Indeed, from a strictly economic point of view, the timing looks catastrophic.
Back in March the Trump administration placed a 25 per cent tariff on imported steel and 10 per cent tariff on aluminium but granted a temporary exemption to Canada, Mexico, Brazil, the European Union, Australia, Argentina and South Korea. That exemption was due to expire in May but has since been extended to 1st June.
If the EU exemption is allowed to lapse, Brussels has pledged to respond in kind with a package of measures hitting imports of iconic American goods such as Harley Davidsons, Levi jeans and bourbon whiskey. Whilst it might sound like the European Commission is aiming to hit those going through a midlife crisis, the measures are actually carefully targeted to cause maximum pain for the President ahead of November’s midterms—they would disproportionately hurt manufacturers based in swing states.