The Trade Week Ahead – The Impact Of Trade Wars

The trade wars are now fully underway – the announcement from the White House that nations have 15 days to ‘pitch’ why they should be exempt from the US’ imposed tariffs is the starter gun for a new global trade war

There is no other way to view it – the response from the likes of China and the European Union have and will be swift, however it is not steel and aluminium that catches my attention it’s the net set the President may (will) bring in.

Make no mistake the aluminium and steel tariffs are just the beginning – The President made a shot across the bow at Germany and France with their ‘favourable free trade’ with the US being an ‘unfair’ advantage in manufactured goods (he is targeting auto manufacturing with these comments).

What would a US-styled manufacturing tariffs mean? Sectors such as automotive, aeronautical and machinery globally would be in the barrel as these sectors appeal to his core voter base – the impact on global GDP would be dramatic; estimates suggest that tariffs of this kind would cause global GDP in value terms to decline by 25%.

What even more interesting is the language being used in response to these tariffs.

‘We will protect our (insert nation here) workers and our (insert nation here) industries’.

The Canadian trade minister in her response to the US announced steel and aluminium tariffs (something Canada is already exempt from due to NAFTA) used this exact phrase.

Imagine what the political communications be coming from nations that are not exempt? (looking at China specifically here)

The conclusion for all this is: the White House is now the largest single risk to global economic prosperity. The bigger issue is how will it end? Answer: unknown.

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