Trump Trade Wars

On January 23 2018, Trump imposed tariffs on solar panels and washing machines.

On March 1 2018, he imposed tariffs on steel and aluminium.

Beginning on June 1, 2018, the Trump administration imposed a 25% tariff on imports of steel, and a 10% tariff on aluminum, on the European Union, Canada, and Mexico.

The tariffs angered U.S. allies, and heightened chances of a trade war.

In a Reuters survey in March 2018, nearly 80 percent of 60 economists who answered a question on the tariffs said they would do more harm than good and the rest said it would do nothing or very little. Not one respondent said they would benefit the world’s largest economy.

Stefan Koopman, market economist at Rabobank said:

“The tariffs are likely to be met with retaliation from U.S. business partners and completely ‘miss the point’ as China is mostly kept out of range. They have the potential to become highly inflammatory and to undermine the global economic expansion.”

Following the announcement in March 2018, Trump tweeted:

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

Trump Trade Wars - Trade wars are good and easy to win. In a Reuters survey nearly 80% of economists said tariffs would do more harm than good. Donald Trump cartoon caricature APT

What is a trade war?

It’s when countries attack each other through taxes and quotas on imported goods.

What is a tariff?

It is simply a tax placed on some particular class of imported goods. Tariffs are typically a governmental tool to protect domestic industries and raise revenue.

Tariff Timeline

On March 8 Trump signed an order to impose the tariffs effective after 15 days. Canada and Mexico were exempted from the order, however an administration official later said that the exemptions for Canada and Mexico were not permanent, but depend on their renegotiating NAFTA.

On March 22 2018 the White House announced that it would suspend the tariffs on the following countries: Canada, Mexico, the European Union, Australia, South Korea, Brazil, and Argentina until May 1, 2018. The tariffs on all other countries went into effect March 23, 2018.

On March 28 2018 South Korea became the first country to be granted a permanent exemption from the steel tariff, followed by Australia, Brazil, and Argentina on May 2 2018.

On May 31, 2018 Trump imposed tariffs on steel and aluminum imports from Canada, Mexico, and the European Union.

A study of the proposal indicated that it would lead to an estimated loss of 146,000 jobs.

What was the response?

China, Canada, and the European Union responded negatively to the initial announcement (which did not mention any temporary exemptions). Canada supplies sixteen percent of U.S. demand for steel, Brazil at thirteen percent, South Korea at ten percent, Mexico at nine percent, and China at two percent.

China

On March 22 2018, Trump announced that he would apply tariffs of $50 billion on Chinese goods.

On April 2, China imposed tariffs on 128 US products, including aluminium scraps, airplanes, autonmobiles, pork products and soybeans. 120 products will be subject to a new 15% tariff, while 8 will have a new 25% tariff.

On April 3, The US published a list which included approximately 1,300 tariff lines. The statement from the White House read:

Year after year, China continues to distort global markets and harm U.S. businesses and consumers with unfair trade practices

On April 4, China imposed an additional 25% tariffs on airplanes, automobiles and soybeans.

On May 9, China cancelled orders of American soybeans, which are the top US agricultural export to China.

On May 20, Treasury Secretary Steven Mnuchin said that:

“We are putting the trade war on hold.”

On May 29, The White House announced it would impose a 25% tariff on $50 billion of Chinese goods to be announced by June 15.

On June 3, China warned that all trade talks between Beijing and Washington will be void if the US imposes tariffs. State news agency Xinhua carried the following statement:

“If the United States introduces trade sanctions including tariffs, all the economic and trade achievements negotiated by the two parties will be void.”

On June 15, Trump announced tariffs of 25% on $50 billion of Chinese goods. Trump stated:

“We have the great brand power in Silicon Valley, and China and others steal those secrets, and we are going to protect these secrets.”

On July 5, Trump fired the biggest shot yet in the global trade war by imposing tariffs on $34 billion of Chinese imports, delivering on a promise to his political supporters that risks provoking retaliation and harming the world economy.

The duties on Chinese goods started at 12:01 a.m. July 6, 2018 in Washington, which is just after midday in China. Levies on another $16 billion of goods could follow in two weeks, Trump earlier told reporters. Total tariffs could reach $550 billion, a figure that exceeds all of U.S. goods imports from China in 2017.

Canada

Canadian Trade Minister, Francois-Phillippe Champagne, said:

“Any tariffs or any quotas that will be imposed on our aluminum industry, our steel industry, would be unacceptable.”

Canadian Prime Minister Justin Trudeau, said:

“We are impressing upon the American administration the unacceptable nature of these proposals that are going to hurt them every bit as much as they will hurt us,”

On May 31, 2018 Canada announced it would retaliate against new U.S. tariffs by imposing its own trade barriers on U.S. steel, aluminum and other products.

Justin Trudeau added:

“American people are not the target… We hope eventually that common sense will triumph. Unfortunately the actions taken today by the United States government do not appear headed in that direction.”

Canadian Foreign Minister Chrystia Freeland said Canada plans to slap dollar-for-dollar tariffs on the U.S. The proposed import taxes would also cover whiskey, orange juice and other food products alongside the steel and aluminum tariffs.

The retaliatory measures will cover CA$16.6 billion in imports.

EU

President of the European Commission, Jean-Claude Juncker responded to the tariffs with:

“So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this. But we have to do it. We will now impose tariffs on motorcycles, Harley Davidson, on blue jeans, Levis, on Bourbon. We can also do stupid. We also have to be this stupid,”

US Reaction

On March 6 2018, Gary Cohn, chair of the National Economic Council, announced his intention to resign; the announcement followed Trump’s cancellation of a meeting with end-users of steel and aluminum that Cohn had arranged in an attempt to dissuade the president from the planned tariffs.

How could tariffs affect me?

They could affect people around the world – especially since China has retaliated.

The world’s second-largest economy has taxed US agricultural and industrial products, from soybeans, pork and cotton to aeroplanes, cars and steel pipes.

In theory, China could also tax US tech companies like Apple, and it could be forced to raise its prices to compensate.

A global trade war could hurt consumers around the world by making it harder for all companies to operate, forcing them to push higher prices onto their customers.

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