Global Geopolitics

President Trump steels himself for a Trade War

President Trump has announced his latest shoot-from-the-hip disruptive trade policy.  The US looks set to impose of 25% tariffs on steel imports and 10% on aluminium. Global leaders have widely criticised the measures.

At a time when the Federal Reserve is particularly vigilant on the risks of higher inflation, Donald Trump’s move seems ill-advised on many fronts. Imports will overnight become more expensive. The measures will squeeze the margins of car companies and others who use steel and aluminium as a key component. US auto companies were already under pressure to replace steel with aluminium in the car’s manufacturer in order to improve fuel efficiency. Aluminium is much more expensive than steel and now there is s tariff on both.

Many often think that China is the main country likely to be disrupted but that’s not the case. Canada (16% of steel imports), Brazil (13%) and South Korea (10%) are the countries most likely to see disruption to their exports to the US. Chinese steel and aluminium exports have quite frankly been buried under 14 anti-dumping regulations and 10 countervailing duties. It is similarly the case for Indian steel.

The US has used the excuse that there are “security” grounds for needing to protect their steel industry from competition. However, this seems disingenuous when you consider that imports of steel account for just a third of total steel consumed and that Canada and South Korea, two crucial military allies, are a quarter of those imports.

President Trump’s latest trade war looks likely to provoke retaliatory action from many. Commentators believe that Europe has already drawn up their hit list or US products where they will impose tariffs. While Trump appears to be pandering to self-interest groups in the US, the President’s loss of big-picture policymaking leaves the global economy at risk of losing one of the key elements of incremental growth from the last twenty to thirty years.

To quote World Trade Organisation economist Coleman Nee “Trade friction between countries can throw sand in the gears of the global economy”

This article was attributed and provided by PG International

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