Trade wars are bad but President Donald Trump's steel and aluminum tariffs won't have much direct impact on the USA economy unless the situation escalates, according to a new survey conducted by Bloomberg News. If our neighbors to the north call Trump's bluff, dairy farmers such as those of central NY - the No. 3 dairy producing state in the USA - could be collateral damage. The number one tactic he employed was to think big.
Talk of a global trade war is in the air following the recent U.S. announcement of tariffs on imported steel and aluminium.
Lots of things are essential to America-and global trade is the best way to make sure we have them.
White House Deputy Press Secretary Lindsay Walters said Ross will work closely with U.S. Trade Representative Robert Lighthizer on determining country exemptions from the steel tariffs, specifically "whether proposed measures between the United States and another country will address the national security threat posed by that country's export to the United States of steel or aluminum products".
The U.S. Constitution gives Congress, and only Congress, the power to regular commerce, but significant pieces of that power have been outsourced to the executive branch over the last four decades. Indeed, most European Union countries are in North Atlantic Treaty Organisation, the world's biggest security alliance, together with the U.S. Barclays Plc has estimated as much as a 0.2 percentage point impact.
Does the Trump doctrine risk a trade war?
Dutch Finance Minister Wopke Hoekstra said the tariffs are "a bad idea". For 30 years, American steel production has stayed about the same. South Korea had actually requested that the U.S. exempt it from the new steel tariff, in consideration of the ongoing negotiations to revise the Korea-U.S. FTA and their bilateral alliance. With the possibility of an exemption in mind, South Korean trade authorities will once again stress that Korean companies' investment in the US can contribute to the American economy and that Korean steel exports do not affect the U.S.' security and economy negatively.
Eighty percent of the economists predicted a small increase in inflation from the trade policy, while the remainder saw no effect.
"He brought a voice of rationality to the White House and was a strong advocate for globalization", said Bill George, a board member of Goldman Sachs, adding that Wall Street was concerned not just about steel tariffs but also a move away from open markets.
That means that while Trump has singled out China for criticism, his latest tariff increase is likely to hit USA allies Japan and South Korea harder. Meanwhile, they send the message that the USA government is lurching toward protectionism, and alienate our allies.
"We expect the impact on USA growth and inflation to be fairly limited", said Mikael Olai Milhoj, a senior analyst at Danske Bank in Copenhagen.
"In some places, trade has been blamed for the pains of globalization, others use it as a scapegoat and insist that we can hide behind walls and borders", EU Trade Commissioner Cecilia Malmstrom said at a conference in Brussels on Monday.
"There are no winners in a trade war", minister Zhong Shan said on Sunday, warning that a trade war between the two economic superpowers will leave the global economy in ruins.
"The last thing both sides of Atlantic need now is protectionism or escalation of Tariff increase".
What happens to global growth if there's a trade war?
Signing up for free trade agreements - in which worldwide trade is left to its natural course without tariffs, quotas, or other restrictions - have always been one of the few legislative agendas with bipartisan support. To put that into perspective, that's about $470 billion - roughly the size of Thailand's output.
Since the tariffs, if the USA pulls the exemptions for its NAFTA partners, are expected to cost Canada US$3.2 billion, he estimates Canada would be justified in levying tariffs on a variety of USA goods of equal value. "But we are kind of collateral damage". That means Trump asked China to amend the balance of trade by about 0.3 percent, or the equivalent of less than one day's deficit. Those tariffs would be crippling to the Canadian steel industry, which provides direct employment to 10,000 in the Hamilton area alone.