The trade wars, which began between the United States (US) and China, have expanded beyond those with Canada, Mexico and the European Union. As evidenced by the recent actions by the Donald Trump administration, this war will go on in two noticeable directions.
Although there were some signs of solutions looming on the horizon in the Washington-Beijing fracas, the US president has already opened a new battlefront with India and Turkey. The US plans to cancel the preferential trade concessions granted to the two developing countries citing that they no longer meet the required conditions.
This comes at a time when trade relations between Washington and EU member-states are worsening, particularly over the duties on vehicles. Meanwhile, US relations with Canada and Mexico have improved after a new treaty — albeit similar to North American Free Trade Agreement (Nafta) — that meets Washington’s requirements.
President Donald Trump will claim some wins following Beijing’s acceptance to the demands of the US, which would otherwise impose $200 billion (Dh734.6 billion) as additional duties on Chinese exports to the US. This was met by a tariff reduction on US exports to China, including on agricultural commodities, and which led to a decline in Chinese exports in February by 21 per cent. And for its trade surplus with the US to drop ever so slightly.
In case of a no-agreement, US consumers will be affected by higher tariffs, which will thereby lead to a rise in prices of goods imported from China and which have become essential to consumers. This might reflect negatively on the goals of Trump — to make quick gains to strengthen his position in the 2020 presidential election.
As for India and Turkey, things seem to be easy for the US president. The two countries’ influence in international relations as well as their importance in terms of trade exchange with the US are not comparable to that of China’s.
In this respect, the two counties would move in two different directions. India will follow the Chinese example: handling things calmly in a bid to reach middle ground with the Trump administration.
Turkey, meanwhile, is expected to take a rigid position, although it seems to be weak in its relationship with Washington. However, it will eventually have to soften its posturing and agree to all conditions. If not, Turkey, which has had problems with Russia as well, would waste some of its privileges which could have been maintained through compromises.
The EU’s position is slightly different due to the presence of multiple countries with differing views on trade and economic dealings with Washington. While Germany and France, which lead the EU, have put up a tough stance to try and maintain the status quo, others such as Poland, the Czech Republic and Hungary, are more prone to give in to Washington’s wishes.
It is noticeable that as time goes by, others are likely to join in the increasingly costly trade wars.
An important question needs to be raised here: Are there other groups that can be included in this trade war? From time to time, the US president takes on the Organisation of the Petroleum Producing Countries (Opec), holding it responsible for high oil prices, despite its efforts to stabilise prices and balance world oil markets.
If the trade war develops, it will affect other vital sectors, including industry and services as well as the capital markets, which have been fluctuating wildly due to the continued uncertainty. This will cast an expansive shadow over the global economy as a whole.