Donald Trump decided to fire the first shots of his trade war. For now, he is only shooting blanks. If a real shot is fired, there will be consequences, and that’s not good for anyone. Perhaps the gods that Trump fears the most will eventually convince him otherwise.
The president’s announcement that he intends to impose tariffs of 25 percent on imported steel and 10 percent on aluminum on all countries was accompanied by the usual promotion on Trump’s favorite social network. “When a country is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good and easy to win,” Trump tweeted. He added, “For example, when we are down 100 billion dollars with a certain country and they get cute, don’t trade anymore-we win big, it’s easy.”
No, it’s not that easy. If American industry imports steel and aluminum, it is because doing so is competitive and therefore more profitable for businesses. Tariffs may help local production of these raw materials, but they will penalize the business, as well as jobs, at companies that use the raw materials to produce other products. The American economy does not necessarily win, but actually, the contrary is true.
In a trade war, everyone loses. In the first place, there is always the possibility of retaliatory measures, as the European Union has already threatened to take. And others will follow. As a result, global trade will be broken, and with it, the economy.
It’s one thing to say that “only by insisting on fair and reciprocal trade can we create a system that works not just for the United States but for all nations,” as Trump said in Davos. Not all act in a fair and reciprocal way, like China, for example, with regard to steel and aluminum. It is another thing to impose general and unilateral protectionist measures, as Trump announced at the end of last week.
In fact, what Trump and some of his entourage advocate is a system that works only for his country and that will impoverish everyone. “An eye for an eye will leave us all blind, and the world in a deep recession,” Roberto Azevêdo, president of the World Trade Organization, warned this week.
The Republican Party has tried to curb Trump’s protectionist enthusiasm; we will see how that is working. At the moment, there seems to be only one entity capable of dissuading the American president: the financial markets and their fears.
Leave a Reply
You must be logged in to post a comment.