President Trump has started Trade Wars that could last for decades
On July 6, President Trump slapped the world’s most populous nation with 25% tariffs – a tax on imported goods – on $34 billion worth of Chinese goods. The initial round of tariffs saw China retaliate with similar taxes on US goods worth the same amount. Despite having a healthy relationship with Xi Jinping, China’s president for life, Donald Trump has been long accusing China of practising unfair trade strategies to ‘overtake U.S. technological dominance’.
These recently introduced tariffs are a part of Trump’s plan to reduce the United States’ massive trade deficit [which stood at $375 billion in 2017] with China. According to China, the imposition of tariffs on Chinese goods marks the start of the ‘biggest trade war in the economic history’. On July 10, Trump’s administration published a list of duties on $200 billion worth of Chinese goods, intensifying the trade war. Although these tariffs won’t come into effect immediately and will undergo a review process, the news will only escalate the dispute further between two of the world’s largest economies.
With tariffs on steel, aluminium and Chinese goods worth billions, President Trump has acted as the initiator of ‘trade wars’ that could last for years, hurting the consumer market all around the world. As of now, there has only been a tit-for-tat exchange of tariffs between China and the United States, but the conflict could worsen and go beyond taxes by disrupting a fundamental component of world trade, the supply and distribution chains.
Although President Trump has casually claimed that trade wars are good and easy to win, one can assure him that no one wins trade wars and that they are a detriment to the international economy as a whole. In the ongoing trade war between the United States and its trading partners, Trump’s plan is to threat other countries with taxes to accede to US demands and lower tariffs. Unfortunately for him, this negotiating tactic hasn’t worked as none of the targetted countries have backed down but have instead retaliated by imposing similar tariffs.
Trump’s Protectionist Policies
The sitting US President has long asserted that years of free-trade policies were responsible for the collapse of the American manufacturing industry, a problem he intends to solve by imposing taxes on imported goods and encouraging the American people to buy locally produced products. Trump has been arguing for protectionism, claiming that cheap consumer goods coming into the country have resulted in American job loss and depressingly low wages.
As a staunch opposer of globalisation, Trump has been advocating for policies which can rapidly reverse all the hard work done in the past decades to liberalize international trade. He has also expressed dissatisfaction with the World Trade Organization, the body which looks after international trade, describing it as a disaster and blaming China’s inclusion in the organization as the cause of closure of more than 50,000 factories and the loss of millions of jobs.
What will happen?
In case the two economic giants do not reach a mutual agreement, consumers all around the world are bound to be adversely affected. Presently, all we know is that there is conflict building up and no resolution in sight. President Trump wants his country to back away from being the enforcer and the guarantor of free trade, a role the US has played for a few decades now. In the near future, we can anticipate both sides announcing more rounds of tariffs on foreign imports, increasing the economic damage and shattering a dream of the working-class, to achieve a period of prosperity.