Just a day ago, Donald Trump threatened the war with a multiple front with Canada, Mexico and China, which will take the global economy into an unprecedented territory.
Twenty -four hours later, we are in a fairly different place with tariffs – or taxes – against American closest neighbors and commercial partners for 30 days.
But 10% of the tariffs on all the imports of goods from China went ahead, and Beijing responded to Natura. So what are the potential economic consequences of these openings of the Salva and can this be turned into a wider trade war?
China is already subject to significant American tariffs and has been from Trump’s first term. But the dean of the nature of today’s new levies from the White House on every import of goods from China – from toys, to mobile phones, clothing – is new and significant.
Beijing’s Promised Tariff retaliation – Including new levies on imports from USA oils, agricultural machines and some cars – it is far less distracted. Yet, retaliation moves us to the Arena of the Tit-For-Tat Action, where the country that experiences tariffs thinks that there is no choice but to return to show its citizens that it cannot be pushed by a foreign force.
This is Definition of a trade war in a dictionary – Economic historians also warn that they tend to create their own momentum and can quickly draw control.
Trump used almost every justification Under the sun for tariffs, from increasing multiple tax revenues to increasing American production and balancing of trade. But one thing confirmed by the days is the new president considers them a powerful way of forcing other nations to do what they want.
He threatened with mass and criminal tariffs at Colombia when he initially refused to accept American flights of his deported nationals, but raised his threat when he accepted Bogota.
The White House may also point to the response of Mexico and Canada, as the threats of the proof of proof give results. Threatened to drive roughly his own free trade agreement in North America Unless these nations have been pulled on border control. Although how many these two countries have actually promised yesterday at the border security against what they are already doing, it is open to the question.
Yet, the problem with a white house that uses tariff threats in this way is that if other countries do not give up – or no agreements are reached – Trump could feel that there is no choice but to follow or risk losing all credibility. And the targeted country can feel that it has to react with its prepared countermeasures, even if he would not.
This high -risk dynamics – where things could throw out control in the atmosphere of distrust and political pressure – that is why many analysts and economists are far from consolation as things have played with Mexico and Canada this week.
Another reason why many economists are afraid of Trump’s scary tariff diplomacy is its potentially coolant on business investments and confidence. Us car companies have a deeply integrated industrial base Broad of America, Mexico and Canada. The car parts repeatedly cross these boundaries in the process of vehicle assembly.
The name of 25% of tariffs on each of these movements would be devastating for these companies. These North American tariffs have been paused for now, but it is very difficult to see us or Canadian car executives who have soon committed to further investment in those cross -border supply chains – and maybe many more years.
These will have negative consequences for their productivity – as well as on the salary of their employees in all three countries. The view of many economists has cross -border supply chains makes these companies more productive than they would otherwise be, and this increases us with workers’ wages compared to a place where they would only be produced in America.
These same effects apply to the global ladder. In the light of Trump’s tariff threats to the European Union, how many US companies are likely to continue with planned investments in Europe – and vice versa?
Countries like Vietnam and Malaysia have indirectly benefited from US tariffs imposed on China in the first presidential term of Donald Trump, as multinational companies transferred production from China and in their territories to avoid taxes and continue exporting to America. But what if Trump is now threatening tariffs against them?
The huge uncertainty of Trump’s tariff threats injected into a global economy – even if they are not translated into actual new taxes – they will probably already do damage.
