Trade War Fears Heat Up as Trump Eyes China

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If, as expected, big action against China is announced, China will nearly certainly take equally strong retaliatory action.

One country or industry may produce and export a lot of steel, but if it doesn't get any subsidies and doesn't have protective import tariffs, then it deserves to capture global market share because it's the most competitive. Their outdated plants and equipment prevent them from using newer, more cost-efficient production methods and adapting to world competition. "Thank goodness, a world leader is calling out the European Union". The two countries can swap steel and solar panels and balance their trade, with each country doing what it does best.

CIO of Close Brothers Asset Management Nancy Curtin agreed the "ripple effect" of a deterioration in trade relations is, at this point, "unknowable", but tougher trade relations with China, which accounts for over half of the U.S. trade deficit, "could have economic consequences".

The action came as the US monthly trade deficit increased to $56.6 billion in January and the 2017 trade deficit was $566 billion - the largest amounts since 2008. And if there is even the slightest chance of preventing Mr. Trump from his trade harakiri, it should be taken.

And every type of government intervention in the marketplace, whether via taxation or tariffs and import quotas, creates winners and losers.

Winners by the diktat of government intervention are often less competitive and therefore need the help of the state to survive. He was replaced by former CIA Director Mike Pompeo. That's not free trade by a free-market nation, nor does China's state-subsidized steel industry operate in a free market.

His administration is negotiating to revamp the North American Free Trade Agreement and last week announced the imposition of tariffs on steel and aluminum imports.

".The fear is the United States and China could hurt each other quite badly in a trade war".

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The Alliance of Automobile Manufacturers warned the tariffs will also drive up the price of steel made in the U.S. But the average USA consumer also benefited from cheaper import prices for his thousands of electronic gadgets and other goods.

A global trade system that doesn't embrace free markets at the national level can not be expected to practice worldwide free trade.

The Trump administration is also considering imposing investment restrictions on Chinese companies over and above the heightened national security restrictions, but details on these were not immediately known.

Even as President Donald TrumpDonald John TrumpAccuser says Trump should be afraid of the truth Woman behind pro-Trump Facebook page denies being influenced by Russians Shulkin says he has White House approval to root out "subversion" at VA MORE directs his staff to finalize the plans for his proposed tariffs on aluminum and steel, there are those who say this isn't about tariffs at all. Repairing the domestic social contract requires a range of social, taxation, and innovation policies to lay the groundwork for a 21st-century version of the New Deal.

"The key issue for global financial markets is whether last week's announcement presages more tariffs being invoked by the [Trump] administration or retaliatory measures being triggered by United States trade partners", Said Desaque, founder and CEO of Desaque Macro Research, said in a note for at investment research and analysis firm Smartkarma.

At the time of writing, Brazil, Japan and China had also signalled their intention to consider retaliatory steps if the President's proposals are able to pass through Congress and into law.

This is not to suggest that messing with tariffs is good economics.

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