No dull day in international politics where U.S. President Donald Trump is involved. The President lives in a steady state of denial, pigeonholed into the idea that slapping tariffs on imports will be good for the U.S. economy, when in fact, economists confirm they are hurting American consumers, farmers and manufacturers alike by raising end-user prices and costs of intermediate goods used in production. Financial markets have been in frenzy.
There is no goodwill being garnered here with trading partners as Trump remains unpredictable on his next big move, often times insincere about his earlier promises. A man of his words, he is not. Just when the U.S. and its Asian arch nemesis, China were coming to a first form deal to end the trade war, Trump announces that he might just delay the deal until after the U.S. elections of 2020.
While both countries are losing this war, other economies have stepped in, though global economic slowdown is quite evident. The trade war began last July with the U.S. slapping tariffs on $550 billion worth of Chinese goods while China retaliating with duties on $185 billion worth of American goods. U.S. blames China for unfair trade practices—that China is keeping its currency appreciated to make exports more competitive for instance, as well as stealing intellectual property of U.S. companies operating in China. Trump believed these duties would bring jobs and manufacturing back to the country. So far, there is little evidence of that happening.
The deal that was soon to be inked was meant to be phase one of the larger agreements that would de-escalate tensions between the two countries. In it, some economists have opined that phase one is merely a “face deal" which would be a political win for President Trump as it would send the stock market shooting up. Its long term economic impact limited to until a fuller agreement is written where tariffs are definitively rolled back and negotiations on intellectual property rights reach settlement. It seems U.S. can do without such a political win so close to another run for the Oval office.
While the fate of the initial deal now hangs in the balance, the U.S. administration is also contemplating aluminum and steel tariffs on Brazil and Argentina. Meanwhile, Europe is also not to be let off easy. As reported by the New York Times, Trump believes American technology is being unfairly taxed in European economies. In response, he has threatened to place steep tariffs on French goods such as textiles, cheese and wines. Digital taxes in other European economies could receive a similar response from Trump administration. Europe warns retaliation.
Alarm bells have been rung by economic forecasters that these tariffs are hurting U.S. companies and consumers which would in turn cause the overall economy to slow down. That alone should alert U.S. policymakers. Meanwhile, global economic growth has already halved. Escalating tariffs and breaking trade ties will only further hit major economies causing financing markets to plummet with reverberations to be felt world over. Trump's tariff policy is the serpent with two heads, about to eat itself.