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Trade wars..!!


"a situation in which countries try to damage each other's trade, typically by the imposition of tariffs or quota restrictions"

Very recently we have witnessed Donald Trump initiating trade war against his allies and business partners taking benefit of section 301 of Trade act 1974 against unfair trade practices and theft of Intellectual property rights. According to some estimates its costing USA around 220-600 Billion Dollars of Loss annually. This remains a very huge amount its inevitable that the USA will take measures to reduce it but if that gets converted into full-blown trade war chances are everyone will lose.

USA has imposed Tariffs on various goods imported to its country like Steel and Aluminum which affected its closest allies like Canada and EU where it has imposed 25% Tariff on Steel and 10% on Aluminum. USA is very much disappointed with EU's less than the required expense on their defence which is required by all NATO countries where USA thinks is also on the losing grounds as major military expenses are born by USA itself. Considering that it has imposed tariffs on Automobile imports to USA which will impact EU automobile giant countries like Germany Similarly USA has also imposed Tariffs on China. Importing Solar panels will be 30% costlier. Washing machines 20% accordingly more than 1300 products were listed in which tariffs will be imposed by the US government against import from China.

Now it was obvious that these governments will retaliate and will impose tariffs on US goods to mitigate losses which they will be incurring due to US's new Trade war. EU responded by imposing tariffs on those products which were consumed by people of USA in regions which heavily voted for Trump in 2016 elections like Bourbon, cranberries, peanut butter and juice. In the same manner, China responded by imposing tariffs on 128 product which it imports from USA which mainly includes Aluminium, Aeroplane,Cars, Pork and Soya bean

The bigger question is what is the consequence of such a trade war??

It totally depends on the level of the escalations made. We have a very good example of 1930 great depression when US economy was not doing well and a famous economist of that time suggested to impose tariffs on various goods to protect USA from economic losses in order to make their economy competitive. We all know that as Hawley Smoot tariffs. The response of this tariffs was all other countries reacted on this and impose varies tariffs on USA which actually hurt its economy in long run and finally this has to be taken back. But it has impacted very badly in an already critical economic situation of various countries.

So its evident if trade wars are not controlled it can backfire very badly and we have instances of it in past as well.

What do you think about it do let me know by raising comments I would love to know your opinion on the same.


India

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