Trade wars have become the most talked about headline in recent weeks concerning the implications they will have on global markets. Beginning with the steel and aluminum Tariffs the U.S. had imposed earlier this year, many countries have retaliated with tariffs of their own including the EU, China, and Canada. Tariffs, which are taxes or duties that are paid on particular imported or exported goods, have largely escalated due to the fact that president Trump would like to lower the current trade deficit the U.S. has with its trading partners. What is hard to understand, is the impacts tariffs will have on economic relations.
What follows is a brief primer on current trade war events between the U.S. and its important trading partners such as Canada, China, and other global economies.
U.S. /Canada Trade War:
Recently, Canada had been one of the many countries affected by the steel and aluminum tariffs the U.S. has imposed. In response to the 25 percent tax, Trudeau and the Canadian government imposed tariffs on $16.6 billion of U.S. goods imported to Canada. Tensions between the two countries have escalated and begin to present larger challenges regarding trading relationships. Relations between the neighboring countries will ultimately have an effect on the renegotiations and stalling of the North American Free Trade Agreement (NAFTA) set for later this year. Trump has also made threats that he may impose new tariffs and possibly even negotiate two separate deals with both Canada and Mexico.
U.S. / China Trade War
In retaliation to President Donald Trump’s 25 percent duties on $34 billion worth of Chinese goods on July 6th, China immediately implemented tariffs of their own on U.S. products. With the two largest economies in trade conflict, tariffs from both countries may become a concern if tensions continue to escalate. In addition, the U.S. has also released a list of potential Chinese goods worth $200 billion that may be subject to 10 percent tariffs. China, who has said it will not fire first, has already stated it will impose additional tariffs of its own if the U.S. continues with its plans.
U.S. /Global Trade War:
With other global economies such as the EU and India striking back for also being impacted by the U.S. steel and aluminum tariffs, it’s difficult to predict which direction this trade war will go. One thing that is for sure: tariffs aren’t good for anyone. The International Monetary Fund (IMF) has warned that the potential escalation could lead to a global economic loss of $430 billion, noting that current world growth remains strong but with mounting risks.
For more information on recent news surrounding the trade tensions, here are a couple links you may find interesting:
- https://globalnews.ca/news/4248573/canada-wto-challenge-eu-trade-war/
- https://money.cnn.com/2018/05/31/investing/us-steel-aluminum-tariffs-response/index.html
- https://www.theguardian.com/business/2018/jul/16/imf-trump-trade-war-global-economy-us-tariff-weo
- https://www.cnbc.com/2018/07/06/trade-war-worries-us-china-tariffs-to-kick-in-on-friday.html
- https://www.bbc.com/news/business-44567636