Has the trade war, which many experts and global institutions had been warning about, begun? If so, how will its affect the global economy and the future of the World Trade Organisation (WTO)? Especially as this war is being led by a US president who has kept his promises to his electorate and without much of a reaction from any side, including countries such as China, which was recently subject to custom duties that would allow the US to generate $60 billion (Dh220 billion).
Following China, with which US trade issues are still not over, the EU, Canada and Mexico now have their turn. President Trump’s administration has imposed heavy charges on US imports of steel, by as high as 25 per cent, and on the aluminium products by 10 per cent, which also applies to Canada’s exports of these.
Unlike China’s soft stance and tariff cuts for some goods, particularly vehicles on which it reduced import duties from 25 per cent to 15, the European Union and Canada reacted violently to the US actions through strong remarks and hints of countermeasures. The French President Emmanuel Macron said, “The US decision to impose customs duties on European metal exports is wrong and illegal and the EU will take measures to protect their interests”.
The Canadian response was even sterner. “We will protect the interests of Canadian workers and we will announce countermeasures,” the Canadian prime minister said, while its finance minister said: “Canada will impose a 10 per cent fee on the US goods, and such duties on the US goods will remain in place until America annuls its fees on the Canadian products”.
This means there is a clear challenge to the US actions at a time when the US has greatly reduced its trade with Russia because of sanctions and has pending issues with Mexico in addition to Canada regarding the Nafta accord. Such developments in trade, among many, clearly indicate that the world has already entered into a trade war through measures and countermeasures that would have serious consequences, especially as the US president does not realise the meaning of a compromise or waiver.
Other victims of trade war
This means the actions will lead to implementation, and with it all of the consequences for countries anywhere. All parties will incur losses, including the US.
There will be other victims from this trade war, the first of which is Nafta bloc, which includes the US, Canada and Mexico, where Trump has announced that he wants to replace the bloc with bilateral agreements, which effectively means ending this trade alliance.
Along with Nafta, the WTO, which was established to facilitate smoother trade and the abolition or minimisation of protectionist tariffs, will see all of its achievements of the past two decades evaporate.
The least developed countries, which have made some gains and provided jobs after the WTO regime came into effect, will be also affected. It is plausible to say that discriminatory and protective measures usually damage the parties in conflict. Therefore, the EU is currently getting a taste of its own medicine as they have been imposing for four decades discriminatory tariffs on its aluminium and petrochemical imports from the Gulf, despite GCC attempts to make the EU treat its products in the same way as the imports from that bloc. Unfortunately, this has been continuously rejected by the EU.
There remains a very important issue: to try and minimise the repercussions for global trade, especially as the concerned parties are the major trading powers.
— Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.
