The International Monetary Fund has warned Trump that the trade war could cost $430 billion to the global economy.
The World Economic Outlook report states that the US could find itself the “focus of global retaliation”. The Washington based IMF warns that with the threats of the US and trading partners it could lead to a lowering of global growth of up to 0.5%, all global economies would suffer, however the US one might be charged with a significantly higher share of its export being taxed globally.
This warning comes after Trump proposed 10% tariffs on around $200 billion in Chinese goods, coming after the previous 25% duties, $34 billion, that were imposed at the beginning of the month of July. The Chinese government quickly retaliated with a list of about $50 billion in US imports, mostly agricultural products, later removing $16.3 billion worth in US aircrafts and adding more food such as fish and nuts.
China has filed disputes in the World Trade Organization (WTO) and is threatening more retaliatory tariffs on US imports if the sanctions do not stop, however China, according to the South China Morning Post, has imported about $130 billion from the US and has exported goods worth $500 billion, thus it stands to lose much more.
Despite the threats of bigger tariffs for China, CNBC reports that Amundi Asset Management analysts claim that the trade tensions might be a good thing for China, as they help “push China to accelerate its reform agenda.” Furthermore, the stock prices have plummeted, and domestic and consumption-driven stock seem to be attractive right now, as well as bank and property also seem to be on the cheaper side.
The US has not only targeted China, Trump has also imposed tariffs on imported steel aluminum thus targeting its close neighbors in the face of Canada and Mexico in the name of national security. The new US duties also affect the EU, Turkey and as aforementioned China.
Canada, Mexico, the EU, China, Russia and Turkey have all imposed retaliatory tariffs for which the US has filed separate disputes to the WTO, since in the words of Mr. Lightizer said, reported by The Express, “These tariffs appear to breach each WTO member’s commitments under the WTO Agreement. The United States will take all necessary actions to protect our interests, and we urge our trading partners to work constructively with us on the problems created by massive and persistent excess capacity in the steel and aluminum sectors.”
Lightizer announced the new restrictions on seafood, baseball gloves, fruits and vegetables and rain jackets, which can all face an extra 10% duties. The reason, according to him is China’s “harmful” international trading. His words are as follows: “As a result of China’s retaliation and failure to change its practices, the President has ordered United States Trade Representative (USTR) to begin the process of imposing tariffs of ten percent on an additional $200billion (£150.8million) of Chinese imports. This is an appropriate response to obtain the elimination of China’s harmful industrial policies.”
The Canadian government on the other hand has imposed $16.6 billion in tariffs on US steel, aluminum and consumer products. The Financial Post reports that Canada claims its retaliatory tariffs are allowed under the rules of the WTO.
Russia, as reported by the Independent, quotes Maxim Oreshkin, the Russian economic development minister that additional tariffs in the range of 25 to 40% have been applied to some road construction equipment, oil and gas equipment, metal processing, drilling equipment and optical fiber. Russia has initiated its dispute on July 2nd and has requested WTO consultations with the US.
In total Canada, China, the EU, Mexico and Turkey have imposed retaliatory tariffs on US$23.4 billion worth of U.S. goods in response to Trump’s tariffs on steel and aluminum.
The Financial Post also reports that the Trump administration is still considering auto tariffs and later this week there will be a Department of Commerce meeting to decide on whether to impose them. All of these stem from Trump’s proposed strategy of defending national American production companies and the American business in general.
All of this comes on top of the stalled North American Free Trade Agreement which has not yet been negotiated, which causes very strenuous cross-border relationships between the US and Canada.
The Trump Administration has openly criticized the WTO, accused them of encroaching on US legal sovereignty and threatened to draft legislation for withdrawal of the US from the organization. The following days will show what the outcome of the situation will be, at this point it is a stalemate of threats and imposing of allegedly prohibited tariffs.