Global Economy Faces Trade War

By The Elm - Apr 03,2018@9:39 am

By Betty Yirga 
Elm Staff Writer

President Donald Trump has recently signed orders imposing stiff and sweeping new tariffs on imported aluminum and steel, according to Peter Baker’s article in The New York Times. I believe the new tariffs will escalate a global trade war because Trump’s trade policy promotes protectionism by preaching statements of nationalism that portrays a zero-sum game rather than integration.

Throughout the last few months, Trump has signed off on multiple executive orders. Trump’s new tariff policy is presumed to be the president’s “most expensive use of federal power to rewrite the rules of global trade since he took office and upended the prevailing consensus on free markets that has largely governed Washington under administrations of both parties for decades,” Baker said.

As a result, Trump’s aggressive trade policy changes have a major effect on trading allies such as Canada, Mexico, Brazil, China, Japan, South Korea, those in the European Union, and ultimately the rest of the world.

President Trump claims that his authority to impose such extensive tariffs comes from a Commerce Department investigation that stated that the use of imported metal posed a major national security threat by devaluing the American industrial base. I disagree with Trump’s view that imposing a 25 percent tariff on steel imports and 10 percent tariff on aluminum will aid the struggling industries.

Although this new trade barrier is meant to protect domestic industries by limiting competing foreign goods from entering its market, it has received strong reactions from leaders in business, government, and other organizations around the world.

According to CNN, most of the countries involved oppose the tariff because they believe it will lead to a trade war. I view this as a great global economic threat since the generalized tariff will harm U.S. allies and major trade partners by hurting their competitive nature in the global market. Globalization needs an open economy and economic integration of nations around the world.

It is important to note that these proposed tariffs are far from accomplishing their deliberate goals of urging trade partners responsible for creating market distortions from dumping and subsidies. This is possible because of America’s trading partners’ decision to retaliate in response to this global economic problem.

Up to 11 nations, including major United States allies such as Australia, Japan, and Canada, have signed a variable-sum trade deal that challenges Trump’s protectionist policies, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. I suppose this is one way to stabilize the global economy and de-escalate potential trade war. As a result, I believe the trade agreement will create more markets to free trade, in both digital services and agricultural products.

The trade deal is expected to generate at least $147 billion in global income. Through the new deal, nations are advocating to enhance globalization and promote free trade and ensure the greatest absolute gains for everyone.

Overall, I anticipate the global nature of Trump announcing tariffs on imported steel and aluminum has the potential to set off a trade war. I also think that Trump’s actions will create major chaos in the global economy by destabilizing the international economic system and putting several nations at an economic disadvantage. Luckily, initiatives around the world have already acted to form a coalition and come up with a trade deal to minimize the global economic threat.

It’s important for everyone to realize that despite Trump’s harmful trade policy, the level of interdependence that has developed between nations in the international system has led to the creation of a new trade agreement that will maintain open markets, increase cooperation, and encourage strong international economic development.

The Elm

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