The Trump administration said it would move ahead with imposing a 25 percent tariff on $50 billion of Chinese products that are imported into the United States starting on July 6. After Friday’s announcement, on Monday, Trump directed the US Trade Representative’s office to draw up a list of $200 billion worth of Chinese goods to hit with a 10% tariff. China also decided to implement retaliatory tariff measures. Now, the global economy is threatened by an unfolding trade war.
In fact, trade tariffs couldn’t produce any winner but detrimental impact on economic growth. Tariffs would increase consumer prices, raise the costs of companies that use imported materials in manufacturing. As the conflict has expanded, the shipments of ports and air terminals around the world are slowing down. The price of key raw materials is rising. In factories from Germany to Mexico, orders are decreasing and investment is delayed.
Global commodity markets are wrestling with the impact of trade conflicts, especially as China seeks to replace U.S. suppliers. In recent years, as the ranks of China’s middle class have grown, the country’s demand for pork has also increased. The increasing numbers of pigs have forced China to import increasing volumes of U.S. soybeans. But China is directly targeting U.S. farms in retaliation for Trump’s metal tariffs and threatens U.S. tariffs on soybeans. Chinese pork producers have set their sights on Brazil and Argentina, which now produce enough soybeans to provide potential substitutes for U.S. supplies.
For buyers of steel and aluminum in the United States, the tariffs have raised the prices and impeded investment. Because tariffs have caused uncertainty, Electrolux, a Swedish manufacturer of household appliances, recently postponed plans to upgrade the stove plants in Tennessee. On the outskirts of Austin, Texas, Matt Bush, a vice president of a small company that produces structures of office buildings and retail space, said that steel tariffs would force his company to pay an additional $50,000 a month to buy metals.
In Mexico, since Trump took office, the anxiety about trade has been continued, because he threats to destroy the North American Free Trade Agreement(NAFTA) and his designs of the separation wall along the border. “That president is driving us to bankruptcy,” said Gustavo Ferreyra Olivares, who had operated a fruit shop in a market of Mexico for 35 years. “Trump is the one who has raised the prices.” Under the NAFTA, Mexico has grown into the world’s largest the U.S. apples importer. But sales have fallen because prices have risen by nearly one-fifth in the past week alone. In response to Trump’s tariffs on steel, the Mexican government recently imposed a 20% tariff on American apples. This will make it even more difficult for Ferreyra to sell his American produce.
These are just a few specific examples for the impacts of Trump’s tariffs on the global economy. The opening of the Pandora’s box left the United States at risk of retaliation. Fear is deepening and the current outbreak of confrontation may drag down the rest of the world. Increased uncertainty and risk in the trade war will affect business confidence and investment. DO not understate the macroeconomic impact of the trade war. It would be serious.