The Trade War

Fear of a trade war as a result of the tariffs that Pres. Trump has levied on certain imports into the USA seem to have come to pass.  It started with the decision by Trump to levy a 25% duty on imports of steel and 10% on aluminium.  It has been known for a long time that several countries, especially China, have been dumping cheap iron and other metal products in the USA, thereby ensuring their factories can keep producing and at the same time undermining the US industries and putting factories and men out of work.  Previous Presidents have been unwilling to become protectionist.  But, Pres. Trump has taken the bull by the horns and decided to protect US industry against these unfair practices, that incidentally are against international trade treaties.  In this way be seeks to re-establish a “level playing field.”

Some of America’s allies pleaded with Pres. Trump to exempt their countries from these tariffs.  But, in the case of some other products, even America’s allies were being unfair, such as the importation of cars from Germany, of butter from Holland and even of ham from Canada.  Each of these countries have established tariffs to protect their own industries while decrying the general use of tariffs and the imposition of equivalent tariffs by the US.  So now these retaliations have developed into a trade war.

As a result of this outcome the US stock market has gone down and Trump has been widely criticized.  But, the fact of the matter is that most of these other countries need the American market far more than the US needs their markets.  The issues with China are by far the most significant, but there again, China is far weaker economy than the US.  Look how Pres. Xi pleaded with Pres. Trump to allow exports of necessary components from the US in order to save his own high technology company XTE.

In a short period of time the one-sided tariffs and import duties will be eased and both sides will benefit.  So that American cars will be cheaper in Europe and elsewhere and US industry will benefit.  However, in the short-term there will be set-backs, such as the decision by Harley-Davidson to move some of their production out of the US because of their dependence on the cheap metals that US industries are now being protected against.

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