On Friday, United States President Donald Trump issued his latest tariff-by-tweet, threatening to slap a 20 per cent duty on European cars. The latest tariff threat was in retaliation to European Union (EU) tariffs totalling €2.8 billion (Dh11.98 billion) on US goods, which went into effect on Friday. The EU tariffs were sparked by US tariffs on steel and aluminium, which went into effect on June 1.
If you’ve been wondering if a trade war is imminent, you can stop. The war is on, the threats have been implemented, and all sides are ramping up for Round Two. Aside from the previously mentioned US tariffs on European autos, the EU says it has an additional €3.6 billion in tariffs ready to announce. While the EU has not said what the next round of tariffs will target, it will likely follow the current strategy of taking aim at goods from the districts of prominent US politicians.
If you want to quibble over the use of the word “global”, remember that Canada, Mexico, China and India have also all announced retaliatory tariffs against the US. In the case of China, the US is currently threatening $450 billion in tariffs.
This tit-for-tat ramping up of rhetoric has to stop. Despite Trump’s previous statement that trade wars are “easy to win”, the rapid escalation of protectionism is threatening to be more adverse to the global economy than the previous status-quo. Last year, global trade grew by 4.7 per cent, the largest increase in 6 years, indicating the world was finally on the mend after a decade of economic turbulence caused by global financial crisis. However, the World Trade Organisation (WTO) has already warned that the global economy is beginning to feel the strain of rising protectionist policies, with trade growth predicted to slump to 4 per cent by 2019. Those estimates were made before the current rush of ultimatums.
The world deserves a break from the boom-and-bust cycles that have been ongoing since 2001. We have seen an entire generation grow up surrounded by unsustainable financial stimulus following bubble-driven market crashes. The world barely remembers what a stable economy looks like.
The next move lies with the US. The root of these current problems lie with their aluminium and steel tariffs, with many of the countries involved saying they would drop their tariffs if the US would only remove theirs. The US does not need to drop their claims of economic unfairness; they can instead take them to the WTO.
