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The Real War Declared By The US: No Missile But Import Tariffs

June 5th, 2018 3:15 pm | By admin | Posted In Business News

Nationalist and protectionist affirmations have been a key feature of President Trump’s administration. Trump is currently developing the “America First” agenda and, in that, is proving to be serious about some of his ideas. It seems as if the real tension is over trade and tariffs rather than the threat of nuclear warfare.


A battle started in April 2017 when the US government initiated an investigation into the steel imports from China. The story continued in January 2018 when Trump announced a 30% tariff for solar panels. China, who is the world’s largest supplier of these products, expressed “strong dissatisfaction” in that decision.


The “steel battle” emerged again with the approval of new tariffs for aluminum and steel imports in March 2018 with 25% for steel and 10% for aluminum imported into the US. According to Trump’s opinion, this regulatory action aimed to provide US steel and aluminum manufacturers the opportunity to expand and grow by making imports from China more expensive and he guaranteed that this will protect hundreds of American jobs. Trump also says that the US and China have a trade balance that highly favors China and justified the decision with a speech based on the “national security” concept.


But problems arise not only for China, as the results of these kinds of regulation changes are hard to estimate. Aluminum and steel are massively employed as raw materials in other industries, with the automobile industry as one of the best examples. US cars are likely to become more expensive and consumers will notice that when buying new cars made in the US in the coming months.


Advocates of free trade say that price distortion caused by government intervention will always have a negative impact. The most competitive countries should have the best opportunities to produce. Low prices are good for everybody if they are an outcome of more efficient and cheap production processes or even new technologies. In the end, cheap production costs really favor the consumer by providing cheap retail pricing, while producers also benefit from higher production volumes. In contrast, defenders of trade barriers try to push preferential laws in order to protect certain industries from overseas competitors.


Aside from the net effect in prices and market efficiency, analysts fear a highly probable retaliation from affected countries in relation to global trade. Although China is certainly the most impacted economy, there are other nations who are affected by these new US trade policies. Even imports from Canada and Mexico, who are US trade partners under the NAFTA, received similar treatment according to announcements made on May 31.


And, as expected, retaliation came very soon as China quickly changed the tariffs on several US goods in response to the new regulations. Bilateral trade accounting for hundreds of billions of dollars is at stake because of these actions, which means numerous companies and employees in both China and the US have an uncertain future ahead. Some will win, but certainly a handful of players will lose.


Both governments decided to put their differences aside and discuss a solution that would benefit both the US and China, but that didn’t last long, as the Chinese government stated that they do not want a trade war but would retaliate if necessary.


With so much surprising news published every week on trade conflicts between the US and China, any industry could be shocked at any given point. Hopefully the US government could soon begin to show a more stable line in relation to its trade policy for the well being of the world’s economy.


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