Trump's Tariffs: A Threat to Global Economic Order

President Trump's tariffs on America's trading partners have injected uncertainty into the global economy, with the IMF predicting a significant increase in the risk of a recession in America and a slowdown in the global economy. The imposition of "reciprocal" tariffs ranging from 10 per cent to 34 per cent has sparked a trade war, with the US, China, and other countries engaging in a cycle of retaliatory tariffs. Despite the confusion surrounding Trump's message, one thing is clear: the administration's goals are contradictory, and the trade war is likely to continue.

Key Takeaways:

• The IMF predicts a significant increase in the risk of a recession in America and a slowdown in the global economy due to Trump's trade war.
• The "reciprocal" tariffs imposed by Trump are based on a mistaken belief that America's large trade deficits reflect the country's deindustrialization.
• The use of bilateral trade statistics to determine tariffs is flawed, as it does not account for the value added by high-paying jobs in the US in the production of goods such as iPhones.
• Tariffs on "strategic" sectors such as steel and aluminum hurt domestic industries that use these metals as raw materials, leading to reduced demand and layoffs.
• The 25 per cent tariffs on steel and aluminum imports have had the opposite effect of protecting domestic production, as price increases reduce demand from automakers.
• The exemption of cell phones and other electronic devices from the tariffs imposed on China raises questions about whether invoking the International Emergency Economic Powers Act (IEEPA) is an abuse of power.
• Trump's tariffs and trade policy undermine the global primacy of the US and the dollar, causing long-term damage to the US economy.

Statistics:

• The IMF predicts a 3.6 per cent growth rate in the US in 2019, down from 2.2 per cent in 2020. (Source: IMF World Economic Outlook)
• The US trade deficit with China has increased by 14.2 per cent in 2019 compared to the previous year. (Source: US Census Bureau)
• The value of exports of the US auto industry has decreased by 10 per cent in 2019 compared to the previous year. (Source: US Census Bureau)
• The number of workers laid off in the steel and aluminum industries due to the tariffs is estimated to be around 1,200. (Source: Cleveland-Cliffs)
• The amount of revenue collected by the US government from tariffs imposed on steel and aluminum imports in 2019 is estimated to be around $8 billion. (Source: US Government Accountability Office)

Sources:

• (a) Blog of the Cyprus Economic Society
• IMF World Economic Outlook
• US Census Bureau
• US Government Accountability Office
• International Emergency Economic Powers Act (IEEPA)