Trade war proves excruciating

Mohammad Amjad Hossain | Published: July 27, 2018 22:08:22 | Updated: July 28, 2018 21:17:47


The administration of US President Donald Trump has filed a case at the World Trade Organization (WTO) on  July 6 against China, the European Union, Canada, Mexico and Turkey for retaliatory measures imposed by these countries against imposition of tariffs by the United States recently on imported steel and aluminum. USA imposed tariffs of 25 per cent on steel and 10 per cent on aluminum on the pretext of threat to national security. President Trump imposed tariffs on steel and aluminum on the basis of the Trade Expansion Act of 1962 citing threat to national security. US Trade representative Robert Lighthizer is of the opinion that the retaliatory imposition of tariffs violates the rules of Geneva based WTO. According to the Washington Post, "There was long an unwritten agreement that WTO member countries would use the national security justification only very sparingly to avoid abuses."

Meanwhile China, the second largest economy of the world, has filed a case with WTO challenging proposed US tariffs. China has taken up the matter with WTO following imposition of 25 per cent duties by US on $ 34 billion worth of Chinese industrial imports. China also responded by focusing largely on America agricultural products, accusing American administration of "triggering the largest trade war in economic history." US Trade Representative, however, is of the opinion that "China's refusal to reform its trade practices, such as its insistence that US companies operating there surrender their intellectual property, left the US with no choice but to impose duties." China is targeting Trump supporters' areas by slapping tariffs on products like soybeans, pork, corn and automobiles. Basically, these products are produced in Republican-dominated US states.

On his return from Helsinki, the  US President threatened China on July 19 with tariffs on all Chinese goods imported to the United States, because "China has ripped off USA for a long time". According to Census Bureau, China imports $ 130 billion worth of goods from the USA.

Similarly, the Trump administration has started a trade war with ally Canada by levying tariffs on Canadian steel and aluminum imports in "the interest of national security". As a matter of fact, the United States and Canada are the largest bilateral trading partner in the world. That has been reflected in the exchange of $ 1.9 billion in goods and services every day.

On Mexico, the next door neighbour, President Trump did not hesitate in imposing tariffs on steel and aluminum. Newly elected leftist president Lopez Obrador of Mexico is known as a proud nationalist like President Trump. Apparently, Lopez Obrador is not anti-American; instead he invites more American companies to invest in Mexico. By now Mexico's economic minister imposed retaliatory tariffs on pork legs, apples, grapes, cheeses and steel products from America. These products come from the US heartland states, where President Trump received support in the 2016 election. As a matter of fact, Mexico buys more steel and aluminum from USA than it sells.

Chancellor Angela Merkel of Germany at a press conference in Berlin on July 20 considers growing international trade war as very serious. Chancellor Merkel expressed concern over Trump's threat to impose new US tariffs on imported cars. She holds the opinion that Germany would work with USA, but "Washington could no longer be relied on as world leader".

The comments made by former Republican presidential nominee Mitt Romney is significant. He is on record saying, "Trade wars are a tax on Americans. They have severe consequences for many employees and inevitably cost American jobs. They are particularly punishing for agriculture". Chairman of Senate Foreign Relation committee Senator Bob Corker has urged lawmakers to take back the authority which was accorded to the President in 1962. The relevant constitutional provision authorises the US lawmakers to impose tariffs.

President Trump's unilateral policy in fact backfired at G-20 finance ministers' conference at Buenos Aires on July 20, which rejected Trump's unilateral tariffs on trade. Similarly, Japan, a close ally of the United States, signed a massive trade pact with the European Union which will open up market for 600 million people. Signing the agreement, European Council President Donald Tusk said, "A trade agreement is not a zero-sum game, but win-win for the involved parties." This is a rebuke for President Trump's imposition of tariffs on Europe, China and North America. European Commission President is due this week in Washington DC to discuss and find modus operandi to reduce tension centring around tariffs imposed by the Trump administration on European goods. It will be interesting to see whether both houses of US congress takes back the authority of the President to impose tariffs.

Mohammad Amjad Hossain, retired diplomat from Bangladesh and former President of Toastmaster International club of America, writes from Virginia.

amjad.21@gmail.com

 

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