Trump's widening trade war

Mohammad Amjad Hossain | Published: June 13, 2018 22:08:22 | Updated: June 19, 2018 21:02:50


President Donald Trump of the United States has in fact initiated a war on global trade on May 31with the imposition of tariff on import of aluminum and steel from Europe, Canada and Mexico.  He invoked national security and imposed tariff on the pretext of eliminating US trade deficit by invoking the issue of national security. After some dilly-dally, As much as 25 per cent tariff on steel and 10 per cent on aluminum have been imposed marking a major trade war with major allies of the US. European Commission President Jean-Claude Juncker, Canadian Prime Minister Justin Trudeau and the Mexican government reacted by severely criticising the move. EU called the step a blatant intervention that amounted to protectionism and it raised the prospect of countermeasures. Canadian PM has reportedly said, "the idea that we are somehow a national security threat to the US, is quite frankly insulting and unacceptable".

It has been reported that while talking to Trudeau over phone, Trump cited false historic information to explain the threat perception. He said that Canada had destroyed the White House in 1812 during a war. In fact, British troops had destroyed the White House in retaliation against the US attack on Ontario and York-two British colonies in Canada.

Also, it seems like Germany's luxurious cars from brands like Mercedes Benz and Volkswagen have become an eyesore for the President who has reportedly witnessed Mercedes Benz cars cruising on the 5th avenue in New York, a major thoroughfare in Manhattan, New York, where the Trump Tower is located. This reportedly drove the President to threaten stopping import of luxury cars from Germany. German carmakers currently control nine per cent of the US premium auto market. From the EU, Germany stands as the biggest exporter of cars to the US. According to the US census, exports from the US to European Union currently stands at $10,48,887.2 million while imports from EU totals $157,339.3 million until April 2018. That means existing trade is in favour of the EU.

The moves from President Trump were met with counter-measures by the EU which declared $3.4 billion in tariffs on the US goods starting from July. Trump had 'heated discussions' with the European allies during G-7 Summit in Quebec, Canada on June 08. He revoked his endorsement of the joint declaration of G-7 summit by a tweet on  the pretext that Tradeau was "Very dishonest & weak" in his post-summit press conference while referring to the US.   Besides, the US President's proposal to bring back Russian Federation in G-7 was also knocked down. Russian Federation was kicked out of G-7 following unlawful occupation of Crimean Peninsula of Ukraine. Moreover, the Canadian PM is frustrated with the slow progress of replacing the 1994 North-American Free Trade Agreement (NAFTA). The agreement was signed between the US, Canada and Mexico during the Clinton era.

 President Trump is likely to face difficulties in imposing new tariffs without clearance from the Congress as a bipartisan legislation is currently in place to review any new tariffs before they can take effect. Many Republican lawmakers are also against the Trump administration's aggressive trade policy.

China, the second biggest economy in the present-day world, is also facing similar tussle with the US. The White House in the first week of June announced that it would proceed with $50 billion in tariffs on Chinese imports and new limits on Chinese investment in the US-based tech industries. However, specifics of the investment restrictions and enhanced export control would be announced on June 30 in spite of the announcement by Treasury Secretary Steven Mnuchin that a trade war with China was on hold. Consumers in the US will be affected if tariffs on Chinese-made products are imposed. It will be interesting to witness whether the Trump and Ivanka brand products from China are exempt from imposition of tariffs.

It is not understood why on earth the Trump administration is antagonising its allies in Europe and North America. As a matter of fact, federal budget of the US depends on its allies. The People's Republic of China is the major shareholder of treasury bonds of the US. Therefore, US debt to China stands at $1.19 trillion as of March 2018. This is 19 per cent of the $6.29 trillion in treasury bonds, notes and bills of the USA held by foreign countries. Hence, it will be interesting to witness the tussle between President Trump and Congress in implementing the new tariffs in the months to come.

Mohammad Amjad Hossain is a retired diplomat from Bangladesh. amjad.21@gmail.com

Share if you like