The War, Will American Loss?

Trade war (https://www.ft.com/)

In the physical wars, let’s say World War 1 and 2, and Gulf War, American come out as the winner technically. How about with current, called as “trade war” launched by Donald Trump to the rest of the world? Will US win? 

What the reason behind trade war? US balance of trade recently was negative US$ 810 billion in goods and US$ 566 billion in goods and services, means deficit. Trump believed that deficit was due to an un-fair trade. To counter this, then US president announced tariff of billion dollars on imported goods.

US trade deficit by countries for 2017 are following (Amadeo, 2018): 

1. China – worth of US$ 375 billion trade deficit. 

2. Canada – worth of US$ $18 billion trade deficit. 

3. Mexico – worth of US$ 71 billion trade deficit. 

4. Japan – worth of US$ 69 billion trade deficit. 

5. Germany – worth of US$ 65 billion trade deficit. 

First, Trump imposed 25% tariff on steel and 10% on aluminum come from Canada, South Korea, Mexico, Brazil, China and European countries. Then, announced tariff worth US$ 50 billion to Chinese goods and planned to do so to European countries (especially Germany), Canada, Mexico and India. 

Sure, those countries will retaliate, China government announced tariff of US$ 32 billion on US goods as first round retaliate and will be followed by other numbers and lists soon. Canada will impose tariff of US$ 12.8 billion on US exports effective next month (July 2018). Other countries vow to do the same as soon as possible. 

On China, Trump re-announced another US$ 200 billion of duties if China responds by July 2018. The trade war not calm down but escalates in sight. For certainly, no countries experienced with this kind of trade war in modern era. 

What effect on the US economy? Since rhetoric start, stock market tumbled. When I wrote this article, Dow Jones future index sank by 0.9% (June 19, 2018). As investors fear of trade war, stock seem uncertain more. 

Producers and consumers started to feel effect in the US. An American industrial materials and soybeans export are disturbing since April 2018. Consumer feeling higher price on certain goods. If this trend continue, inflation picks up sooner rather than later. Recession will come after globally, not only in the US.    

Who will be the winner and loser? Everybody will be the loser, both US and other countries generally. Unluckily, no winner at all. 

Reference 

Amadeo, K. (2018). “U.S. Trade Deficit by Country, with Current Statistics and Issues.” Retrieved from  https://www.thebalance.com/trade-deficit-by-county-3306264