Today we will witness the first salvos in a trade conflict between the United States and China which, if not defused, could escalate dangerously, with negative, if not calamitous, effects on the global economy.
The United States will start imposing US$34 billion (S$46.4 billion) worth of tariffs on Chinese goods. China will likely retaliate immediately, with duties on a range of US products, including food items, electric vehicles and chemicals, among others. The Trump administration has vowed to meet Chinese retaliation with escalation, threatening further rounds of tariffs on as much as US$450 billion worth of Chinese goods. Meanwhile, US tariffs on steel and aluminium have already gone into effect. Canada has responded with duties on US metal products and a variety of miscellaneous goods, ranging from lawnmowers to food products to playing cards. The European Union has also retaliated against the US metal tariffs with 25 per cent duties on American products, including whisky, tobacco, Harley-Davidson motorcycles and peanut butter. US President Donald Trump then raised the ante by threatening tariffs on European cars. The EU responded that it would, again, retaliate. We are, it would seem, already in the early stages of a trade war.